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EU warns France, Italy on economy, rewards six others for progress

Mon, 2nd Jun 2014 18:28


Brussels (Alliance News) - The EU kept up the pressure Monday on France and Italy to get a better grip on their economies, while rewarding six other countries for bringing their deficits down to an acceptable level.

"Public finances are today much healthier, ... but the recovery is fragile and we are not yet where we want to be," European Commission President Jose Manuel Barroso said. "More effort will be required."

France, the EU's second-largest economy, has emerged as a leading cause for concern. It has struggled to rev up its sluggish competitiveness, fueling worries that its woes could complicate the recovery under way in the crisis-bruised eurozone.

The commission warned Monday that France's budgetary strategy is "only partly" in line with EU rules, as the bloc's executive unveiled new economic recommendations for almost all EU countries.

The bloc requires, among other things, that national deficits be brought down to 3% of gross domestic product (GDP), while debt should be no higher than 60%.

France was given until 2015 to reach the 3% mark, but a forecast issued by the commission in May predicted that Paris will only hit 3.4% if it undertakes further measures.

"The deterioration of the trade balance and of competitiveness throughout the last century calls for sustained political action," EU Economy Commissioner Olli Rehn said.

President Francois Hollande's government is facing strong headwind, however, following an election victory by the anti-euro, far-right Front National (FN) last month.

Eurosceptic and anti-austerity parties made gains across the EU in European elections at the end of May. But Barroso insisted that the bloc should remain on a path of fiscal consolidation coupled with growth-enhancing measures.

"It would be a complete mistake now ... to put in question our commonly agreed rules, and come back to the behaviour that precisely before the crisis created this situation," he said, urging countries to pursue reforms even though they are "politically difficult."

France is not the only country falling short of EU economic goals.

The commission expects Spain, the eurozone's fourth-largest economy, and Slovenia, which has been fighting off speculation that it will need a bailout, to be off-target in 2015 - despite having been granted extra time already to manage their respective deficits.

"Significant challenges" remain in Spain, a past recipient of a bank bailout, while Slovenia faces "substantial risks," Rehn said.

He also issued a warning for Italy, which has managed to get its deficit under control, but has debt that far exceeds EU-recommended levels at an estimated 135%.

"Italy is ... experiencing excessive macroeconomic imbalances," Rehn said. "The reform momentum should be intensified so that Italy can create the conditions for a stronger and more durable recovery."

Britain and Ireland - which became the first eurozone bailout country to no longer need outside help - may also struggle to reach the 3% deficit target in time, the commission forecast showed.

Within the eurozone, the commission can enforce its recommendations with fines, while non-euro countries face other sanctions such as the freezing of regional aid. Some leeway can be given if countries make credible budgetary efforts, but suffer unexpected growth setbacks.

The commission on Monday did not advocate sanctions for any country. Its only recommendations to EU governments were to remove Austria, Belgium, the Czech Republic, Denmark, the Netherlands and Slovakia from the bloc's excessive deficit procedure given their progress.

That would bring down to 11 the number of EU countries still falling under the procedure.

Copyright dpa

Alliance News



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