Brussels: The European Union head office is opting not to sanction two of its biggest economies just yet for missing public finance targets and instead will give France and Italy until the spring to bring their debts and deficits in line.
Paris and Rome have been accused of being too profligate in their budgetary spending plans at a time when the EU and the 18-country Eurozone have been advocating strict austerity as the best way to get their public finances into shape.
“We will decide in early March whether any further steps are necessary,” said EU Economic and Financial Affairs Commissioner Pierre Moscovici as he stepped away from imposing immediate sanctions on two of the three biggest economies in the Eurozone.
Since Eurozone nations are tied through their currency there is a need for overall controls since wayward economic policies in one nation could pull the whole currency zone down.
The Commission insisted the extension would not allow laggard countries to get away with wayward spending and that they had to push through structural reforms.
“We will see to it that France and Italy push through important reforms over the next months,” Commission President Jean-Claude Juncker said in newspaper interviews. “Otherwise we lose our credibility.”
The speed at which countries bring their budget deficits down is a matter of debate in Europe. Some policymakers think spending shouldn’t be cut too quickly in order to spur growth.
Even Germany, the economic engine of Europe, came in for criticism as it is deemed too hesitant in boosting public spending despite favourable financial circumstances.
“The sizeable fiscal space, the investment needs and the very low interest rates, which imply that the social returns largely outweigh the borrowing costs, leave scope to boost public investment,” the Commission said of Germany’s situation.
If only countries like France and Italy had such options.
