France receives an extension for its deficit deadline – yet again 

Frankrijk heeft wederom een uitzonderingspositie gekregen. In maart 2015 heeft de Commissie Frankrijk voor de derde keer sinds 2009 uitstel verleend voor het bijstellen van het begrotingstekort. Dit levert veel kritiek op van andere EU-lidstaten en bovendien tast het de geloofwaardigheid van de regels aan die in het Stabiliteits- en Groeipact zijn opgenomen. Grote lidstaten lijken anders behandeld te worden dan kleine lidstaten, dit schaadt niet alleen de integriteit van de EU, maar ook de rol van de Commissie als toezichthouder.

Hoai-Thu Nguyen, verbonden aan de Universiteit van Maastricht, weergeeft de uitzonderingsrol van EU-lidstaat Frankrijk.

On 10 March 2015 the finance ministers of the EU member states decided, on recommendation of the European Commission, to grant France another extension of two years for correcting its budget deficit (see press release of the Council here).

France, which faced a fine up to over €4 billion for repeatedly missing its targets, now has until 2017 to bring its budget deficit under 3% of GDP as is required under EU rules. This is the third time since 2009 that France has been granted such an extension. Under the previous deadline France was required to bring its deficit below the 3% threshold by 2015 but failed to do so. According to the Commission’s 2015 winter economic forecast the French deficit in 2015 was expected to be a little over 4% of GDP. The Council has now changed the deficit targets for France to 4.0% of GDP for 2015, 3.4% for 2016 and 2.8% for 2017. It justified the extension by “ the fiscal effort made by France since 2013, and by the current weak economic conditions and other factors”.

This new extension granted to France by the Commission – which also decided to not start proceedings against Italy or Belgium for their high level of government debts – has elicited some criticism, notably amongst smaller member states and those pleading for a stronger application of the EU budget rules. Under the Stability and Growth Pact (SGP) member states are required to keep their government deficits below 3% of GDP and their government debts below 60%. Doubts arises, however, on the credibility of such rules if non-compliance therewith is not consistently punished. While it might seem understandable that from a political point of view that the Commission is more hesitant to outright sanction one of the largest and one of the founding member states of the EU, especially not with the right-wing party currently being on the rise. Leniency towards a big member state such as France nevertheless entails the risk of creating a perception that larger member states are treated differently – more leniently – than smaller member states that are punished for not meeting the targets. Such a different treatment of member states in turn would cast a giant shadow not only on the integrity of the EU budget rules but also on the Commission’s role as the guardian of budgetary discipline in the member states. Moreover, it is likely that other, smaller member states will follow and ask for the same lenient treatment as was shown by the Commission vis-à-vis France, a request that would weaken the credibility of the SGP even more if followed by the Commission. In fact, Ireland has already demanded more leeway on its own budgetary plans following the French extension.

Therefore, if the European Commission decides to show leeway towards some (larger) member states, it can do so and the final decision lies with the ministers of finance of the EU after all, but it should be aware that such flexibility also bears the risk of undermining the respect for the EU budget rules and could lead to a loss of trust in the Eurozone as a whole.To put it in the words of German finance minister Wolfgang Schäuble: If the Commission is too flexible on the growth and stability pact for political reasons - it has to be aware there will be consequences.”