Contraction In French Economy Raises New Questions Over Stability And Growth Pact

by Ulrika Lomas, for LawAndTax-News.com, Brussels

22 August 2003

According to an AFP report published this week, an unexpectedly sharp contraction in the French economy during the second quarter of this year has increased debate over the possibility of loosening the terms of the EU Stability and Growth Pact.

Figures recently released by Eurostat have revealed that a slump of 0.3% in France last quarter pushed GDP growth in the eurozone into the red.

Speaking to AFP, Ludovic Normand, an economist with CCF bank observed that:

'The pact is no longer being respected and a temporary easing of its budgetary rules is indispensable.'

This is a viewpoint supported by French President, Jacques Chirac, who last month called for a loosening of the Pact's terms, whilst hinting that France may ignore them anyway if change is not forthcoming.

In a recent interview, the EU's Social Affairs Commissioner, Anna Diamantopoulou, also called for the Pact to be updated, whilst warning that:

'There is a world of difference between a decision taken by all the EU countries to reform the pact, and unilateral decisions by some governments to jeopardise the pact and so put monetary union and its economy at risk.'

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