France Launches First Challenge To EU Budgetary Goals

by Ulrika Lomas, Tax-News.com, Brussels

20 June 2002

In a not entirely unexpected move, the newly elected centre-right government in France took the first step in its campaign to loosen the provisions of the EU Stability and Growth pact on Tuesday.

The Stability and Growth pact, previously agreed to by President Jacques Chirac, stipulates that eurozone countries must endeavour to have their budgets as near to balance as possible by 2004. However, prior to his re-election, M. Chirac promised several tax cutting initiatives which are likely to seriously jeopardise the country's commitment to the pact.

Speaking on Tuesday, French Industry Minister and former European Parliament speaker, Nicole Fontaine suggested that there should be more emphasis on economic growth within the context of the eurozone pact.

'There is room for manoeuvre,' she observed, adding that: 'We tend to forget that this is the pact for stability and growth.'

The French Industry Minister's remarks provoked an immediate and angry response from European Commissioner President, Romano Prodi, who cautioned that he would recommend that public warnings be issued to any countries which fail to meet the budget deficit deadline.

However, German Finance Minister, Hans Eichel does not believe that the new centre right government is prepared to opt out of the stability pact, according to a report from the Reuters news service on Tuesday.

Speaking to reporters in Berlin, Mr Eichel - who held talks with French Finance Minister, Francis Mer at the G7 meeting in Canada last weekend - announced that: 'I do not have the impression that the French government seriously wants to get out of its obligations under the EU stability pact'.

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