“Because it’s France” no basis for EU budget rules

June 1, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. 

Some countries are more equal than others when it comes to enforcing European Union budget rules. This is the only conclusion to draw from Jean-Claude Juncker’s explanation that France wins more fiscal leeway “because it is France”. Little comfort that the head of the European Commission, which is responsible for policing national budgets, is only saying what is already patently obvious.

France has surpassed the EU’s 3 percent budget-deficit-to-GDP limit a dozen times since the euro’s launch in 1999. And even after excluding periods of recession, it is Europe’s worst repeat offender over this period, according to an Ifo Institute tally. Yet the Commission in 2015 gave the country two extra years to comply with the rules.

There’s little shame in showing such flexibility when a country is suffering an economic downturn or slowly recovering from one. Nor is Juncker the first European Commission chief to resist blind application of the Stability and Growth Pact’s budget rules. One of his predecessors, Romano Prodi, in 2002 described the pact as “stupid”, saying it was too rigid.

But the rules have become more supple since Prodi’s day and now place more emphasis on underlying deficits that strip out the impact of economic swings, expenditure growth and how debt levels are changing. While such refinements were intended to make the Stability Pact more intelligent, they have also made it more complex. This leaves more scope to dress favouritism up as flexibility.

To be fair, France is not the only one that has won wiggle room in good economic times as well bad. Recession could excuse only 51 of the 165 cases in which EU countries have bust the 3 percent deficit-to-GDP cap since 1999, according to Ifo. Some instances will be more excusable than others. And the Commission can hardly come down like a ton of bricks on smaller countries, such as Portugal, which have endured far more austerity in the past, or the likes of Italy, which is pushing through reforms, at the same time as giving France more leeway. The biggest problem with the Gallic exception may be that it gradually becomes less and less exceptional.

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