EU to rule on German and French deficits

THE European Commission will make a decision on what to do about excessive budget deficits in Germany and France in November, spokeswoman Amelia Torres said yesterday.

The budget shortfall of Germany, which is the eurozone’s biggest economy by far, will exceed the European Union’s imposed ceiling of 3% of gross domestic product for a fourth year running this year.

Germany said that its budget gap this year would be some 3.7%, a figure unchanged from 2004, but the final shortfall will be somewhat closer to 4.0% after the European Union’s statistics office said that Germany cannot use the securitisation of future pension fund contributions to reduce the gap.

France has given a pledge to bring its deficit down to 3.0% this year from 3.6% in 2000 and after three years above the limit, but Commission forecasts show it is likely to rise above the limit again next year.

Torres said that the Commission would move to issue its economic forecasts for EU states in the first half of November and go on to tackle the cases of the eurozone’s two biggest economies only afterwards. “It is only then that we will be revisiting the issue of the accounts for both Germany and France,” she said.

Economic and Monetary Affairs Commissioner Joaquin Almunia was quoted on Friday last as telling the German daily newspaper Sueddeutsche Zeitung that the Commission was “very likely” to recommend stepping up the EU’s disciplinary action against Germany to the last stage before financial sanctions.