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World

France opposes return to pre-virus EU deficit rules

  • But opponents of the pact, which was toughened during the eurozone debt crisis, believe that they impose needless austerity on national economies.
22 Sep 2020

BRUSSELS: France opposes a return to the EU's current but suspended rules on deficits and public debt after the coronavirus crisis, European Affairs Minister Clement Beaune told AFP on Tuesday.

"We cannot imagine putting the same pact back in place," Beaune told AFP, referring to EU limits on overspending by member states.

The rules are currently on hold, giving governments free rein to stimulate their economies with major spending programmes to fight a historic recession.

The rules theoretically limit a government's annual public deficit at three percent of gross domestic product, and debt at 60 percent, though the ceilings are frequently violated.

Governments are very reluctant to decide on a date that the rules should fall back into place, given the economic uncertainty caused by the Covid-19 pandemic.

"When the crisis is over, we will have deficit levels, but even more debt levels, which will be very different from the world we experienced a few years ago throughout Europe," Beaune said.

Member states have often discussed the importance of reforming the rules, but this has yet to gain traction given the opposition of northern countries and their fears of overspending by France, Spain and Italy.

At a meeting this month of EU finance ministers, the European commissioner for the economy, Paolo Gentiloni, refrained from giving an exact date for a return to normality.

On Tuesday, he addressed a letter to the member states calling on them to "support the recovery" through 2021 in an effective greenlight to keep on spending and ignore the rules.

"Prudent" spending will resume when "economic conditions allow", he said, adding that "we will reassess the situation and take stock" in Spring 2021.

To change the rules would take years given the strong views on the matter, especially from fiscally conservative Germany and the Netherlands.

But opponents of the pact, which was toughened during the eurozone debt crisis, believe that they impose needless austerity on national economies.

Beaune was until this summer the European affairs adviser to French President Emmanuel Macron.