EC likely to reject French budget for tighter version

The European Commission is likely to reject France’s 2015 budget draft at the end of October and ask for a new one that would better reflect Paris’s deficit reduction obligations under EU rules, several eurozone officials said.

It would be the first time the EU executive has exercised its power to demand changes to a national budget draft under new prerogatives that EU countries granted the Commission in 2013.

The Commission is also likely to step up the disciplinary procedure against France to the final stage before fines, while at the same time granting Paris the extra two years it wants to bring down its budget shortfall within EU limits.

The decisions, some of which will be taken by the outgoing Commission before a new team led by Jean-Claude Juncker takes office in November, would give France more time while upholding the credibility of the recently toughened EU budget rules, one eurozone official with insight into the process said.

Such a solution would also help the designated commissioner in charge of policing budgets, French Socialist Pierre Moscovici, to prove he will not give preferential treatment to his own country. Moscovici was ordered to submit written replies by today to detailed questions on how much flexibility he would give to countries that repeatedly breach EU fiscal rules after lawmakers found his answers at a hearing last week evasive. “It would save face for everybody,” the official said of the proposed Commission action. “Even if it would be a bit humiliating for France, they probably know they cannot get away without anything.

“And it would also save face for Germany and the others, who are concerned about the longer-term effects, about not watering down the rules, but who also want to give France and its unpopular president a fighting chance,” the official said. Socialist President Francois Hollande’s approval rating is at an all-time low of 13% in some opinion polls due to public anger about unemployment, economic stagnation, public spending curbs and resistance to structural reforms.

Germany, one of the strongest advocates of budget discipline in the eurozone, has been reticent in criticising France.

“It’s about the big political picture in France, in the end. That’s why Germany is so reticent. In Berlin they already have a strong picture where Marine Le Pen is the next French president,” the eurozone official said, referring to the leader of the extreme-right National Front who leads the field in some presidency polls.