France gets two more years to correct its government deficit

Council of the EU
  • 10/03/2015
  • 12:50
  • Press release
  • 104/15
  • Economy & finance
10/03/2015
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The Council granted France two extra years to bring its government deficit below 3% of GDP, the EU's reference value for deficits.

In a recommendation adopted on 10 March 2015 under the excessive deficit procedure, it called on France to correct the deficit by 2017.

The Council called on France to fully implement measures already adopted for 2015. It called for an additional fiscal effort by the end of April 2015, involving additional structural measures equivalent to 0.2% of GDP. This will enable France to close the gap with a recommended improvement in the structural budget balance of 0.5% of GDP for 2015.

Weak economic conditions

The Council found that extending the deadline for correcting the deficit was justified by the fiscal effort made by France since 2013, and by the current weak economic conditions and other factors.

According to the Commission's 2015 winter economic forecast, the government deficit is projected to reach 4.3% and 4.1% of GDP in 2014 and 2015, respectively. France is thus set to miss the previous 2015 deadline for correcting its deficit.

Fiscal effort since 2013

The cumulated adjustment in the country's structural balance over 2013-2014 is estimated to have reached 1.9% of GDP. This falls short of the 2.1% of GDP recommended by the Council in June 2013. However, the Commission estimates that the fiscal effort made by France amounted to ‑0.1% in 2013 and 1.1% in 2014. The cumulated effort is thus in line with the "above 1.0% of GDP" indicated by the Council. The evidence did not lead the Council to conclude that no effective action had been taken.

In setting 2017 as a new deadline, it took into account economic conditions and other relevant factors, such as the implementation of structural reforms. It required an annual adjustment in the structural balance that is at least equal to the minimum benchmark of 0.5 % of GDP set by the EU's Stability and Growth Pact.

Excessive deficits since 2009

This is the third time the deadline for the correction of France's deficit has been extended. The country has been subject to an excessive deficit procedure since April 2009, when an initial Council recommendation called for its deficit to be corrected by 2012.

In December 2009 however, the Council extended this deadline to 2013, after the Commission forecast that France's 2009 general government deficit would reach 8.3% of GDP, nearly three percentage points higher than its previous estimate.

In June 2013, the Council extended the deadline again, this time to 2015, on account of a worse-than-expected deterioration in France's economy.

New deficit targets

In its new recommendation, the Council set headline deficit targets if 4.0% of GDP for 2015, 3.4% for 2016 and 2.8% for 2017. This is consistent with improvements in the structural budget balance of 0.5 % of GDP in 2015, 0.8 % in 2016 and 0.9% in 2017. To achieve the targets, additional measures of 0.2% of GDP in 2015, 1.2% in 2016 and 1.3% in 2017 will be required.

The Council set a deadline of 10 June 2015 for France to take effective action.