December 7, 2014 / 4:08 PM / in 3 years

Italy and France hit back at Merkel over economic reforms call

BERLIN (Reuters) - Italy and France expressed irritation on Sunday with a call from Chancellor Angela Merkel for them to do more to bring their budgets into line with EU rules, telling the German leader to focus on her own economic woes instead of lecturing others.

German Chancellor Angela Merkel attends a cabinet meeting in the Chancellery in Berlin, December 3, 2014. REUTERS/Hannibal Hanschke

In an interview with German daily Die Welt, Merkel had called on Italy and France to enact additional measures ahead of a March ruling by the European Commission on whether their budgets conform with the bloc’s deficit and debt rules.

Unless further steps are taken by the new deadline, the Commission could fine France for falling short of its deficit-cutting obligations and put Italy under a disciplinary process because of its debt levels.

“The Commission has made clear that what has been put on the table so far is insufficient. I would agree with this,” Merkel said.

A senior Italian official reacted strongly to the comments, saying it was “regrettable” that Merkel viewed the reforms introduced by Italian Prime Minister Matteo Renzi as lacking.

“The Italian government has never permitted itself to hand out marks to a European Union member country and we ask Germany for the same respect,” Sandro Gozi, Italian undersecretary for EU affairs, said in a statement.

“Maybe Chancellor Merkel should focus on Germany’s domestic demand, on its lack of investments, or on its balance-of-payments imbalances. It would be an important contribution that Europe has been waiting on Berlin to make for a long time and which so far has not happened.”

French Finance Minister Michel Sapin said Merkel’s remarks were probably aimed at members of her own party, the conservative Christian Democrats (CDU), who are holding their annual congress this week in Cologne.

“We are making reforms in France not to please one European leader or another, but because they are necessary for France,” Sapin said in response to questions on French television.

He said Germany had its own problems, from crumbling roads to a low birth rate.

“In Germany the population is decreasing every year,” Sapin said. “In 10 or 20 years because of this we will be in a better position. Germany is in a better position now because of the reforms it did a decade ago.”

Last year the Commission won new powers to assess draft national budgets to ensure they are in line with EU agreements.

But sanctioning countries for budget plans that fall short remains highly sensitive.

In Italy Renzi reluctantly amended his original budget plan in October in the face of European Commission objections, offering some 4.5 billion euros of additional deficit cuts worth around 0.3 percent of GDP.

But with the euro zone’s third-biggest economy mired in recession and unemployment above 13 percent, the highest level since the 1970s, he wants to avoid further spending reductions.

France initially pledged to bring its deficit down to the EU limit of 3 percent by 2013 but has now acknowledged that it won’t reach that threshold until 2017.

Sapin announced last week that extra savings would help France cut its deficit to 4.1 percent of gross domestic product (GDP) next year, compared to a previous goal of 4.3 percent.

Additional reporting by Steve Scherer in Rome and Leila Abboud in Paris; Editing by Greg Mahlich

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