The European Commission has issued a reprimand to France for breaking EU fiscal rules before an election where the frontrunners are making lavish spending promises.
The EU executive’s decision to launch the “excessive deficit procedure” against France is a blow to Emmanuel Macron – with a deficit well above the EU threshold – and also sets up a collision course with a post-election government potentially dominated by the far-right or the left coalition.
Both groups have made large spending pledges ahead of legislative elections on 30 June and 7 July and, according to polls, are leaving Macron’s Renaissance party trailing in third place.
The far-right National Rally has pledged to repeal Macron’s hard-fought pension reform and reduce the retirement age for those who began work in their teens. Marine Le Pen’s party also wants to reduce VAT on food and fuel, and in the 2022 presidential campaign promised to exempt workers under 30 from income tax.
The New Popular Front, which unites the left, wants to reduce the retirement age to 60, raise the minimum wage and freeze the prices of food, energy and fuel.
The current finance minister, Bruno Le Maire, warned that “a Liz Truss scenario was possible”, if National Rally implemented its economic programme, referring to how the short-lived British prime minister spooked financial markets with plans for big unfunded tax cuts. He has made similar warnings about the spending plans of the left.
France’s deficit – the difference between government spending and revenues – was 5.5% of economic output in 2023 and is forecast to remain at 5% in 2025, well above the EU threshold of 3%. Government debt was 110.6% of gross domestic product in 2023 and is forecast to increase to 113.8% by 2025, compared with the EU limit of 60% of GDP. “The debt sustainability analysis indicates high risk over the medium term,” the commission said.
Six other member states in breach of EU deficit rules were put into the same procedure on Wednesday: Belgium, Italy, Hungary, Malta, Poland and Slovakia.
Under new rules agreed last year, rule-breaking countries must reduce “excessive” deficits by 0.5% a year. But in an attempt to avoid hurting economic growth, the rules allow more flexibility for spending on defence, green and digital policies.
In theory, repeat rule breakers could be fined, but no country has ever faced this sanction, amid fears it could worsen the economic situation and fuel political tensions.
EU officials will not set out explicit recommendations to rule-breaking countries on how to reduce the deficit until after a new commission takes office on 1 November. These deficit-reduction plans would also have to be endorsed by EU finance ministers.
The EU economy commissioner, Paolo Gentiloni, declined to comment on the French parties’ spending plans, merely saying that he was confident that discussions with a future French government would be “useful and with a good conclusion”.
Gentiloni, a former Italian prime minister, rejected suggestions that the obligation to reduce deficits signalled a return to austerity: “Our economic and fiscal policies are now entering a new cycle. This does not mean back to normal, because we are not living in normal times; and definitely not back to austerity, because this would be a terrible mistake.”
