9 OCTOBER 2002
European Union finance ministers lambasted France's refusal yesterday to sign up for a plan to reduce its structural deficit as quickly as other countries have agreed to at yesterdays Ecofin meeting, which gathered the EUs finance ministers in Luxembourg.
"It's regrettable," Dutch Finance Minister Hans Hoogervorst said, referring to an agreement reached following late-night discussions Monday to which "all ministers but one" were in agreement. The agreement calls for countries like France, Germany, Italy and Portugal, which still run deficits, would narrow their structural budget gaps by 0.5 per cent of gross domestic product startsing in 2003.
The structural gap strips out the fiscal effects of short-term economic shocks.
"I'm not pleased with the situation we are in," the Dutch finance minister said. Smaller European countries like the Netherlands have much better budget situations than their larger neighbours.
France's decision to keep its budget deficit at 2.6 per cent of GDP next year, unchanged from 2002, "is clearly not in line with the Stability Pact," which calls for budget balance over the medium term, he added.
French Finance Minister Francis Mer defended his government's budget choices following the meetings, saying that "each country has a different situation." He also stressed that France is choosing to support economic growth and military spending in the short term and that it will lower its structural gap by 0.5 per cent a year starting in 2004.
But some ministers are worried about the message sent to the public of such a two-track approach to budget discipline.
Luxembourg Finance Minister Jean-Claude Juncker said he was disappointed by France's stance, since "it's easier to explain to the general public" if all euro-zone countries agree on the timing of deficit reduction.
But looking for the silver lining, Hoogervorst said, "it does show that we had a very earnest discussion."