EU takes action against France and five nations for violating budgetary rules

Brussels:

France, Italy and five other EU countries were placed under formal proceedings on Friday for violating the bloc’s fiscal rules, a move that could lead to unprecedented sanctions unless they take corrective action.

“Today the Council adopted decisions establishing the existence of excessive deficits for Belgium, France, Italy, Hungary, Malta, Poland and Slovakia”, stated the body that represents the 27 Member States.

Known as the “excessive deficit procedure”, it begins a process that forces a country to negotiate a plan with Brussels to recover its debt or deficit levels.

The seven countries had deficits – the difference between public revenue and expenditure – exceeding three percent of gross domestic product, in violation of the bloc’s fiscal rules.

France’s deficit reached 5.5 percent in 2023, but it appears that reducing it would be difficult due to political uncertainty following the results of an early election that was won by a left-wing coalition that demanded much higher public spending.

The EU countries with the highest deficit-to-GDP ratios last year were Italy (7.4 percent), Hungary (6.7 percent), Romania (6.6 percent) and Poland (5.1 percent). ).

The council also said that Romania “did not take effective measures” against its excessive deficit despite having opened proceedings against it in 2020 and that it would therefore be kept under surveillance.

As a next step, countries will have to submit medium-term plans by September on how they will rectify the violation.

Afterwards, the European Commission will present assessments of the plans in November with details on the path they must follow to return to fiscal health.

This is the first time Brussels has reprimanded EU states since the bloc suspended rules following the 2020 coronavirus pandemic and the energy crisis triggered by Russia’s war with Ukraine, as states supported businesses and families with cash public.

The EU spent two years during the suspension reforming budgetary rules to give greater leeway for investment in critical areas such as defence.

But two sacred objectives remain: a State’s debt must not exceed 60 percent of national production, with a public deficit not exceeding three percent.

Countries that fail to remedy the situation could, in theory, be punished with fines of 0.1 percent of gross domestic product (GDP) per year until action is taken to resolve the violation.

In practice, however, the commission never went so far as to impose fines, fearing that doing so could trigger unintended political consequences and harm a state’s economy.

(Except the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)