France, Italy unveil plans to further cut their deficits

France's finance minister Michel Sapin

France and Italy unveiled plans yesterday to trim their deficits more than previously planned in last-minute pitches to get clemency from the European Commission on their 2015 budgets.

The EU’s executive arm has until tomorrow to decide whether to reject France and Italy’s 2015 draft budgets for failing to make sufficiently large improvements in their public finances.

The two countries had so far defied pressure from Brussels and Berlin to rein in their public finances faster over concerns that more belt-tightening could throttle fragile economies.

But in separate gestures to Brussels, Italy said it would make additional deficit cuts worth €4.5bn next year and France said it would trim by an extra €3.6bn-€3.7bn. The finance ministers of both countries laid out their cases for Brussels’ clemency in letters yesterday to economic and monetary affairs commissioner Jyrki Katainen.

A spokesman for Katainen said the Commission welcomed Italy’s “constructive feedback”, but that discussions remained ongoing. The commission later said there was nothing else to add about France.

In Italy’s case, the measures include scrapping €3.3bn of planned tax cuts. The changes follow a request from the commission for action after the budget pushed back promised debt reduction targets. It remains to be seen whether the amendments satisfy Brussels.

France’s finance minister Michel Sapin said that the additional resources come from lower-than-expected costs on interest payments and contributions to the European Union’s budget, which with other cost savings are worth some €1.5bn.


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