ECONOMY

EU fails to give France even a slap on the wrist

Brussels – The council of EU finance ministers (Ecofin) ended yesterday, with participants managing to make a novel interpretation of the Stability and Growth Pactavoid in order to avoid a clash over the stubborn insistence by France and Germany to post excessive deficits. The pact, agreed upon in 1997 at Germany’s insistence, and as a precondition for its acceptance of a single European currency, prohibits eurozone countries from posting a budget deficit greater than 3 percent of their gross domestic product (GDP) and mandates substantial fines for violators. France and Germany have both posted deficits in excess of 3 percent but have taken slightly different positions: whereas Germany has said it cannot, for the moment, maintain a smaller deficit, France says it is unwilling to. Normally, France would now be searching for funds to pay the substantial fine involved in its case (three years of excessive deficits). But it is merely looking for 6 billion euros to reduce its primary deficit by 0.7 percent to 1 percent of GDP next year. After an often heated discussion, France undertook to present a strategy for limiting its primary deficit by November 15. This despite the fierce opposition of Austria, Finland and the Netherlands, the guardians of fiscal orthodoxy. Germany stood by France. Finance Minister Hans Eichel told his colleagues that the punitive measures of the Stability Pact are not for those who violate it, but those who do so «consciously and by design.» This interpretation overlooks the facts that, recently, France has boasted of violating the pact because it wants to boost its flagging economy. In the same spirit as Eichel, French Finance Minister Francis Mer had declared, three weeks ago, «We will make some small adjustments so as to convince the European Commission of our good intentions.» European Finance Commissioner Pedro Solbes, lacking the means to unilaterally impose sanctions, said that the decision concerning France was «especially reassuring and shows that effort brings results.» No meeting The overworked Solbes failed to find time to make an appointment with Greece’s Economy and Finance Minister Nikos Christodoulakis to discuss their different estimates of Greece’s budget deficit in 2004. Greece claims it will reach 1.3 percent of GDP and the Commission says it is going to be double that. Christodoulakis told journalists that he will send Solbes data showing that his ministry’s estimates are correct. He added that the Commission has «underestimated» revenues for 2004. Christodoulakis used the occasion to attack the opposition New Democracy party for concurring with the Commission’s estimates. «Our aim is to improve ourselves and not demean our efforts, like the opposition does,» he said. Late on Monday, Christodoulakis met with EU Regional Policy Commissioner Michel Barnier, with whom he agreed upon the disbursement of 2 billion euros in aid from the Third Community Support Framework (CSFIII). They also discussed ways to finally close the accounts of CSFII. Barnier’s office said that the meeting took place «in a friendly atmosphere.» The lack of disbursement of EU funds, used for infrastructure projects, accounts for Greece’s gaping budget deficit this year, almost three times as much as last year’s.