July 20, 2024

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France Warned by E.U. About ‘Excessive’ Deficit

2 min read

Add an entry to the list of troubles facing President Emmanuel Macron of France less than two weeks before pivotal legislative elections: potential financial penalties by the European Union for failure to rein in the nation’s ballooning deficit and debt.

The reprimand, announced Wednesday in Brussels, highlighted France’s fragile finances at a moment of political turmoil, as the far right National Rally party, led by Marine Le Pen, and a left-wing coalition, the New Popular Front, appear increasingly positioned to form a new government that could weaken Mr. Macron’s grip on power.

Mr. Macron threw French politics into disarray earlier this month by calling for snap parliamentary elections after his party was battered by the far right in European Parliament elections.

The fiscal warning by E.U. authorities set the stage for a possible confrontation between Brussels and Paris. Both the National Rally and the New Popular Front have pledged to spend more on public services at a time when Mr. Macron is being forced to find deep budgetary cuts of up to 25 billion euros ($26.9 billion) this year to improve the nation’s finances. The opposition parties, however, are critical of E.U. institutions, and want to ease rather than tighten fiscal policy.

France is in debt to the tune of around €3 trillion, or more than 110 percent of gross domestic product, and a deficit of €154 billion, representing 5.5 percent of economic output. The budget crunch comes after Mr. Macron spent heavily to support workers and businesses during pandemic lockdowns. His government also provided subsidies to help households cope with a jump in inflation after Russia’s invasion of Ukraine, which sent energy prices soaring.

E.U. rules typically require member countries to maintain budgetary discipline or face hefty fines if debt climbs above 60 percent of gross domestic product or if budget deficits reach more than 3 percent.

Those rules were suspended after the pandemic, when all European…

Liz Alderman

2024-06-19 10:32:00

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