EU Commission Flags Seven Countries, Including France and Italy, for Excessive Deficits

The European Commission has taken a decisive stance against seven EU countries, including France and Italy, by opening procedures for excessive public deficits. These countries have exceeded the 3% GDP deficit threshold set by the Stability Pact, with France’s public deficit reaching 5.5% last year. The Commission’s actions come as a response to the need for fiscal prudence in the face of mounting geopolitical risks and the aftermath of the pandemic and the war in Ukraine. The Commission will present recommendations for deficit reduction to the EU finance ministers in July, and affected countries are expected to submit their recovery plans by September 20. While financial sanctions are a theoretical possibility, amounting to 0.1% of a country’s GDP, such measures have never been previously applied. The Commission emphasizes that the goal is not to return to austerity but to ensure responsible budget management. France, in particular, is facing scrutiny as its public debt is projected to increase to 112.4% this year and 113.8% in 2025, significantly exceeding the EU’s 60% limit. The upcoming legislative elections in France may complicate negotiations with the EU to reduce the deficit and debt. Italy, on the other hand, has shown improvement in its macroeconomic balance, moving from an excessive imbalance to a balance, similar to Greece. This move by the Commission marks a significant step in enforcing fiscal discipline within the EU, as it seeks to maintain the stability of the eurozone and the integrity of its budgetary rules.

Key points

• The European Commission has opened procedures for excessive public deficits against seven EU countries, including France and Italy, which exceeded the 3% GDP deficit threshold.
• France’s deficit reached 5.

5% last year and the country’s debt-to-GDP ratio is expected to rise further, prompting the Commission to propose disciplinary actions.

• The Commission aims to encourage prudent budgeting and fiscal discipline to maintain the stability of the eurozone, with recommendations for deficit reduction to be presented in July.