BRUSSELS, April 9 – The EU’s executive on Wednesday welcomed pledges by France’s new premier to slash public spending and drive ahead with structural reforms, but said it awaited further details this month before passing judgement.
At stake is when and how France will respect promises to cut its overall budget deficit, amid new signals that it is angling for extra leeway.
Commenting on Prime Minister Manuel Valls’ maiden parliamentary speech, European Commission spokesman Simon O’Connor said “we salute the government’s renewed pledge to improve public finances and pursue targets decided by France and its European partners in June” at an EU summit.
France at the time was given an extra two years, until 2015, to bring its deficit under the EU-agreed ceiling of 3.0 percent of output.
The spokesman said that France’s draft stability and reform programmes “are awaited this month as is the case for all euro member nations.”
The 18 countries in the single currency are required to stick to strict debt and deficit ceilings and to submit draft budgets and data to the Commission, which polices the guidelines set by the Stability and Growth Pact and can sanction any nation in breach of them.
The Commission is to release its next conclusions in June.
An EU official who asked not to be identified said that if France failed to reach its deficit target “but is making the required structural reform, we can talk”, but if it were “to deviate from the nominal target there would be a deliberate breach.”
– 3.0 percent objective –
Addressing parliament in Paris for the first time since taking over as premier, Valls vowed on Tuesday to “open a new chapter” by slashing labour costs and taxes to turn around the struggling economy.
And turning to European Union requirements, he vowed to keep pushing for the “recovery” of the country’s public finances, confirming 50 billion euros ($69 billion) in budget cuts by 2017.
Valls said the cuts included 19 billion euros from state spending, 10 billion euros from health insurance and 10 billion euros from local governments.
He did not specify where the rest of the savings would be found.
“Of course we must straighten up our public finances but not by destroying our social model or our public services,” he said.
“I am for respecting our commitments, for budget responsibility, not for austerity,” Valls added, though he made no mention of whether Paris would push for another extension to an EU deadline to reduce its public deficit, as the new government has hinted it may do.
In a radio and television interview on Wednesday, Valls said that the 3.0-percent public deficit remains “the objective” but did not mention when France intended to achieve that level.
He said immediately thereafter that he did not intend “to announce figures which we cannot achieve”.
Valls also complained about the high level of the euro, which he said was hurting the chances for an export-led recovery and was due to the European Central Bank not stimulating the economy as much as its counterparts in Japan and the United States.
The head of the French central bank, Christian Noyer, who sits on the ECB’s policy body, hit back on Wednesday, saying the analysis was mistaken and that the euro was strong because of its attractiveness and not because of monetary policy.