EU de­mands tough re­forms butFrance, Spain­given­lee­way

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BRUS­SELS — The Euro­pean Com­mis­sion laid down its eco­nomic tar­gets for EU na­tions des­per­ately seek­ing growth and jobs in the fall­out from the debt cri­sis but gave France and Spain ex­tra time in re­turn for deeper re­forms.

The debt cri­sis has seen Brus­sels gain ad­di­tional pow­ers to en­sure EU mem­ber states toe the line to avoid fu­ture trou­ble – just as well, when 20 of the 27 were un­der sur­veil­lance for...

... breach­ing the bloc ’ s pub­lic deficit and debt lim­its, re­spec­tively at three per cent and 60 per cent of gross do­mes­tic prod­uct (GDP).

Top­ping the prob­lem list, France, the EU’s sec­ond-largest econ­omy strug­gling in re­ces­sion, will have to step up the pace of re­forms, in­clud­ing of its costly pen­sion sys­tem, if it is to get back on track, the Com­mis­sion said on ed­nes­day.

Spain, the Nether­lands, Poland, Por­tu­gal and Slove­nia should all be given more time to cut their deficits, the Com­mis­sion said, while rec­om­mend­ing that Malta be placed un­der scru­tiny and sharply crit­i­cis­ing Bel­gium for fail­ing to do enough.

In France, mea­sures should be taken “by the end of this year to re­form the pen­sion sys­tem and en­sure it is in equi­lib­rium by not later than 2020”, the Com­mis­sion said.

As an age­ing pop­u­la­tion adds to the pres­sure, the French govern­ment will have to ad­just pen­sion pay­ments and the re­tire­ment age – al­ready on the rise.Given an ad­di­tional two years to put its fis­cal house in or­der, such pen­sion and labour mar­ket re­forms must get France from an ex­pected bud­get deficit of 3.9 per cent this year to 3.6 per cent in 2014 and 2.8 per cent in 2015, it said. Cur­rent es­ti­mates put the French deficit – the short­fall be­tween govern­ment rev­enue and spend­ing – at 3.9 per cent this year and 4.2 per cent next, with the econ­omy set to shrink 0.1 per cent in 2013.

Prime Min­is­ter ean- Marc Ayrault said the rec­om­men­da­tions were in line with cur­rent pol­icy “and France will hon­our its com­mit­ments ” .

How­ever Pres­i­dent Fran­cois Hol­lande said the Euro­pean Com­mis­sion could not “ dic­tate ” to Paris.

“The Euro­pean Com­mis­sion can­not dic­tate to us what we have to do. It can sim­ply say that France must bal­ance its pub­lic ac­counts, ” he said.

Com­mis­sion head ose Manuel Bar­ros said France had steadily lost its com­pet­i­tive edge over the past 20 years and needed ma­jor struc­tural re­forms.

“Our mes­sage to France is a very de­mand­ing mes­sage, ” Bar­roso said, adding it was “the right so­lu­tion” to give the govern­ment more time to meet the deficit tar­get.

Faced with the debt cri­sis, EU gov­ern­ments opted ini­tially for tough aus­ter­ity mea­sures but soar- ing un­em­ploy­ment and pop­u­lar un­ease have switched the em­pha­sis to growth now, rather than sta­bil­is­ing the pub­lic fi­nances.

For the Com­mis­sion, the EU’s ex­ec­u­tive arm, this means a del­i­cate bal­anc­ing act be­tween pru­dence and en­forc­ing bud­get rules un­der its “Ex­ces­sive Deficit Pro­ce­dure” (EDP), while al­low­ing gov­ern­ments the lee­way they need to get their economies mov­ing again.

Spain, which nar­rowly avoided a full-scale debt bailout last year, was given two ex­tra years to bring its bud­get deficit into line at 2.8 per cent of GDP by 2016.

The Nether­lands got an ex­tra year to 2014 and bailed-out Por­tu­gal one year to 2015, while Slove­nia, be­set by worries its stricken banks will also force it into a res­cue, got two years to 2015.

Poland was granted two years to 2014.

In re­turn, all th­ese coun­tries must com­mit to a se­ries of gen­eral and spe­cific re­forms to im­prove eco­nomic ef­fi­ciency and sta­bilise govern­ment fi­nances, or face stiff fines.

For Ger­many, Europe’s eco­nomic pow­er­house and one of the few not on the EDP list, the Com­mis­sion found lit­tle cause for com­plaint but did sug­gest Ber­lin try to bring down its to­tal debt, at 82 per cent of GDP.

zri­tain, how­ever, with an ex­pected 2013 deficit of 6.8 per cent, has much more to do, and “ should con­tinue to pri­ori­tise the re­duc­tion of its debt and deficit ” , the Com­mis­sion said.

For growth, Bri­tain needs to ad­dress “struc­tural weak­nesses, in­clud­ing a lack of hous­ing sup­ply, skill gaps and the need to re­new and up­grade trans­port and en­ergy in­fra­struc­ture ” , it added.

On the other side, the Com­mis­sion said Italy, along with Latvia, Hun­gary, Lithua­nia and Ro­ma­nia, have done enough to bring their bud­gets into line and so should be dropped from the poorly- marked na­tions on the EDP list.

Putting a coun­try un­der the EDP gives Brus­sels added over­sight of its eco­nomic poli­cies, al­low­ing it to make spe­cific rec­om­men­da­tions as to what it should do and with sanc­tions avail­able to en­sure that they are im­ple­mented.

EU lead­ers are ex­pected to dis­cuss the Com­mis­sion’s rec­om­men­da­tions at a sum­mit at the end of une be­fore they are for­mally ap­proved later by fi­nance min­is­ters of the 27 EU mem­ber coun­tries. —

EU com­mis­sioner for Eco­nomic and Mone­tary Af­fairs Olli Rehn (left), EU com­mis­sioner for Tax­a­tion and Cus­toms Union, Al­gir­das Semeta (cen­tre) and EU com­mis­sioner for Em­ploy­ment, So­cial Af­fairs and In­clu­sion Las­zlo An­dor (right) give a joint press con­fer­ence on Wed­nes­day. — AFP/VNA Photo

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