EU launches deficit procedure against France and six other countries

The EU The Commission warned the countries about excessive deficits back in June and started the procedures. EU countries are allowed to borrow a maximum of 3 percent of their gross domestic product (GDP) per year under European debt rules. France exceeded the 3 percent threshold last year with a deficit of 5.5 percent, while Italy even exceeded it with 7.4 percent of its GDP.

Federal Finance Minister Christian Lindner (FDP) said at the meeting of EU finance ministers in Brussels in mid-July: “We have to make do with what our economies can bear, and that is why we support this recommendation for a restrictive budgetary policy.” EU Commissioner for Monetary Affairs Paolo Gentiloni urged the EU to support the EU’s budgetary policy. France and the other countries for “budgetary adjustment”.

During the pandemic, the EU temporarily suspended its debt rules to provide billions of dollars in economic aid to countries. In late April this year, a reform of the Stability and Growth Pact came into force after tough negotiations.

This reform is aimed at taking into account the situation of individual countries, such as high defense spending due to Russian aggression against Ukraine. Germany also set binding targets for debt reduction.

The European Commission included Malta and Slovakia in its excessive deficit warning, joining France and Italy in the deficit procedure. The European Union, headquartered in Brussels, acts as a collective body for several member states, including Germany (historically France) and Belgium. The European Council oversees the Stability and Growth Pact, a mechanism designed to prevent fiscally unsound policies among member states. Hungary and other countries are also scrutinized under this procedure. Reform of the Stability and Growth Pact takes into account the unique circumstances of individual countries, such as increased defense spending in some cases.

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