EU worried about France, Italy budgets | News | DW | 20.11.2019
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EU worried about France, Italy budgets

The European Commission says eight member states are at risk of breaching the bloc's tough public spending rules next year. It wants surplus-running countries such as Germany and the Netherlands to spend more.

The European Commission said on Wednesday that eight European Union member states risk breaching the bloc's tough fiscal rules next year by missing their debt and deficit reduction targets. Among the countries are Italy and France as well as six others, including Spain, Portugal and Belgium.

"Among the budgetary plans found at risk of non-compliance, the ones that concern us most are those with debt levels that are high and not reduced fast enough," Commission Vice President Valdis Dombrovskis said in a statement, explicitly referring to Italy, France, Belgium and Spain.

Read more: Italy's economic plight, and why it matters

"We invite all member states that are at risk of non-compliance with the (rules) to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant," he said.

EU treaties mandate member states to limit their annual deficit to below 3% of GDP and public debt to less than 60% of GDP. The debt and deficit rules are the cornerstone of eurozone membership, but countries routinely exceed the limits.

Of particular concern for Brussels is Italy's mountain of debt that is expected to balloon to a huge 136.8% of GDP, the highest in the euro area except for bailed out Greece.

The public debt of France, the eurozone's second-biggest economy, also presents a worry, as it is expected to hit 98.9% of GDP by the end of 2020.

'We invite all member states that are at risk of non-compliance with the (rules) to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant,' said Dombrovskis

'We invite all member states that are at risk of non-compliance with the (rules) to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant,' said Dombrovskis

No immediate action needed?

France, Italy, Belgium and Spain "have not sufficiently used favorable economic times to put their public finances in order," said Dombrovskis. "In 2020, they plan either no meaningful fiscal adjustment or even a fiscal expansion," he added.

"This is worrying because very high debt levels limit the capacity to respond to economic shocks and market pressures,'' Dombrovskis stressed.

The Commission, however, isn't planning to take legal action to push these countries to tighten finances.

Brussels also didn't request any immediate changes to the draft national budgets. "We are not saying that it has to be done immediately," Dombrovskis said, adding that the Commission did not ask for changes to the draft budgets because it did not see serious risks of non-compliance with EU rules.

Instead, the Commission is encouraging countries with strong finances, particularly Germany and the Netherlands, to spend more to help the eurozone economy. Both countries have been under pressure to boost spending to stimulate growth across Europe, which has been underperforming, especially in manufacturing.

The EU commissioner for economic affairs, Pierre Moscovici, on Wednesday lauded the two countries for taking the "first steps towards a more expansive fiscal policy." 

"This is excellent news for the growth of these countries, of course, but also for the eurozone as a whole," Moscovici said.

sri/aw (AFP, Reuters, AP, dpa)

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