No 'serious' fault found, France and Italy budgets pass EU review

The European Commission said on Tuesday (Oct 28) it had found no serious fault with eurozone member states' 2015 budget plans, clearing France and Italy after they made last-minute changes to meet EU demands.
The budget review covered all 18 eurozone countries, with the focus on struggling France and Italy after Brussels told them that their original plans fell well short of what was required to meet European Union norms.
"After taking into account all of the further information and improvements ... I cannot immediately identify cases of particularly serious non-compliance which would oblige us" to reject the planned budgets, EU Economic Affairs Commissioner Jykri Katainen said.

The Commission, the European Union's executive arm, gained far-reaching powers during the debt crisis to vet eurozone budget plans to ensure that member states did not exceed the deficit ceiling of 3.0 per cent of gross domestic product (GDP).

France, however, had forecast a deficit - the shortfall between government revenue and spending - of 4.3 per cent for 2015, saying it would not reach the EU target until 2017.
It could do no better, Paris said, because the economy had stalled and it needed more time to push through the difficult structural reforms needed to get the economy growing again.
That was clearly not good enough for Brussels, with Katainen demanding an explanation and proposals to remedy the problem. In response, French Finance Minister Michael Sapin on Monday announced some "good news" - he had managed to find another €3.6 billion (US$4.6 billion) to reduce the deficit.

"I think that France here is offering clarifications and elements that should allow us to stay on course," Sapin said, stressing that the government was making use of all the flexibility possible under EU rules. For Italy, the problem is with the structural budget deficit - the underlying shortfall left after variables are stripped out.

Economy Minister Pier Carlo Padoan pledged to reduce the structural deficit by 0.3 per cent of GDP in 2015, instead of the original 0.1 per cent. Italy also promised to do more to reduce its massive debt, put at 133.4 per cent of GDP in 2015 and more than twice the EU ceiling of 60 per cent.

BRUSSELS WELCOMES EFFORTS

After weeks of mounting tension and fears of a stand-off with two of the EU's largest economies, the tone in Brussels changed markedly with the French and Italian measures.
Without mentioning any country by name, Katainen said that over the past two weeks the Commission had "carried out consultations with certain member states to request further information or to highlight some initial concerns. "I want to welcome the fact that these member states have responded constructively to our concerns," he said in a statement.
Apart from France and Italy, the Commission also reportedly had reservations over the plans submitted by Austria, Malta and Slovenia. Analysts said that while France and Italy appear to have scraped through they still had a lot to do to get a clean bill of financial health.
"The budget fight between the three capitals is not done yet," said Alan Lemangnen at Natixis investment bank. "The Italian and French governments will certainly have to present updated structural reform programmes to justify (their route towards) compliance," Lemangnen said.

The Commission has been demanding that France and Italy introduce tough reform programmes to restore their competitive edge at a time when a modest eurozone recovery has run out of steam, with powerhouse Germany even showing signs of weakness.
"I have to remind you that the Italian economy is in one of its deepest and longest recessions ever," Finance Minister Carlo Padoan noted on Monday.

- AFP/de

http://www.channelnewsasia.com/news/business/international/no-serious-fault-found/1440454.html

28/10/14

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• Letter from President Barroso to the Italian Presidency of the EU Council on the EU budget payment shortages...

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• Σύγκρουση Ρώμης - Βρυξελλών για τον προϋπολογισμό του 2015

• Πιέσεις από Βρυξέλλες και στο βάθος ο Standard & Poor`s

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• Statement by Vice-President Katainen on the Draft Budgetary Plans

European Commission, Statement, Brussels, 28 October 2014:

Under the strengthened budgetary policy coordination introduced in 2013 and being implemented for only the second time this autumn, euro area countries are required to submit draft budgetary plans for the following year by 15 October. The European Commission must adopt an opinion on each of these by 30 November. However, in cases where the Commission identifies "particularly serious non-compliance with the budgetary policy obligations laid down in the Stability and Growth Pact", it is required to adopt its opinion within two weeks of the plans' submission.

• Over the past two weeks, the Commission has carried out consultations with certain Member States to request further information or to highlight some initial concerns related to the draft budgetary plans they submitted. I want to welcome the fact that these Member States have responded constructively to our concerns.

• After taking into account all of the further information and improvements communicated to us in recent days, I cannot immediately identify cases of "particularly serious non-compliance" which would oblige us to consider a negative opinion at this stage in the process.

Our services will now work to complete their detailed assessment of the draft budgetary plans and the new Commission will adopt its opinions on these in November. Any shortcomings or risks will be clearly highlighted at that point. Any possible further steps under the Stability and Growth Pact will be assessed at a later stage, taking into account the Commission's Autumn Economic Forecast and the opinions on the draft budgetary plans.

 http://europa.eu/rapid/press-release_STATEMENT-14-343_en.htm?locale=en

28/10/14