Chirac's Budget U-Turn Angers Germany

by Ulrika Lomas, Tax-News.com, Brussels

17 May 2002

Speaking in Berlin earlier this week, German Finance Minister, Hans Eichel criticised the French President, Jacques Chirac for making promises in his pre-election manifesto which are likely to cause France to break a budgetary commitment made to the European Union.

At a recent EU summit in Barcelona, M. Chirac and his former Prime Minister, Lionel Jospin promised to work towards: 'the medium-term budgetary objective of close to balance or in surplus by 2004 at the latest'.

However, prior to the presidential elections at the beginning of May, he also promised to reduce income taxes in France by one-third over five years, in addition to lowering corporate tax rates and social charges for employers. It is thought that these measures would delay French progress towards a balanced budget until at least 2007.

'I don't understand how Mr Chirac can vote in favour (of the 2004 deadline) in Barcelona and say a few weeks later that this no longer applies,' the German Finance Minister is reported to have observed, adding that: 'I don't believe his commitments will last.'

The Financial Times revealed on Tuesday that former French Finance Minister, Laurent Fabius shares Mr Eichel's views on the country's duty towards the European community:

'International responsibilities must be adhered to with pragmatism, but loyally,' he told a conference at the weekend. 'When a country thinks its budget deficit is too high, it shouldn't increase it further.'

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