France 'Entirely Committed' To Stability Pact Rules Says Raffarin

by Ulrika Lomas, Tax-News.com, Brussels

29 August 2003

Following a meeting with the European Commission this week, French Prime Minster Jean-Pierre Raffarin proclaimed that the French government is "entirely committed" to the stability pact, though he continued to argue for a degree of flexibility in the EU's fiscal rules.

"Europe will do its job, the French government will do its job," said the Prime Minister after talks with head of the Commission Romano Prodi and his colleagues.

However, whilst France's job from Raffarin's viewpoint is clearly boosting economic growth and reducing unemployment by a series of tax cuts, Europe's job will presumably be to impose heavy fines on the French government for allowing its budget deficit to remain over the 3% stability pact threshold this year, with little prospect of it reducing next year. This could result in a fine equal to 0.5% of French GDP, roughly equal to 7.6 billion euros.

Though Prodi has reportedly described the rules of the Growth and Stability Pact as "stupid" in the past, he appears as determined as ever to police the regulations, saying Europe has "no choice but to abide by the rules of the treaty."

The decision whether to impose fines on France, and possibly Germany which is also in breach of the pact, will fall to the council of EU finance ministers, and the French government has been given until October to formulate fresh spending plans.

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