France’s austerity measures have been approved by the European Union, marking a crucial step towards reducing its substantial deficit and adhering to EU guidelines.
EU Approves France‘s Austerity Plans
Heavily indebted France has received approval from the European Union for its plans to gradually reduce its substantial deficit.
The Council of the European Union, meeting in Brussels on Tuesday, adopted a recommendation by the European Commission to implement France’s budget. The plan aims to decrease the country’s new debt to 3% of economic output by 2029.
Initially, this year’s goal is to achieve a deficit ratio of 5.4%, down from the previous government’s more ambitious target. However, due to the current political situation in Paris, it remains unclear which austerity measures the new Prime Minister François Bayrou will be able to push through the divided parliament.
France’s Finance Minister Éric Lombard expressed gratitude towards his EU counterparts and the European Commission. He emphasized that “we cannot leave such debt and such a deficit to our children and grandchildren.”
With a debt ratio of almost 110% of economic output in 2023, France is among the EU’s worst performers, according to Eurostat. Only Greece (163.9%) and Italy (134.8%) have higher debt levels.
As the second-largest economy in the EU after Germany, France must adhere to the union’s rules on government debt and deficits. The debt level of a member state should not exceed 60% of economic output, while the general government deficit – the difference between income and expenditure – must be kept below 3% of gross domestic product.
France’s Debt Levels
France’s high debt levels have raised concerns among EU officials. The country’s debt ratio is significantly higher than the prescribed limit, with only Greece and Italy having more substantial debt burdens.
The European Union’s rules on government debt and deficits aim to prevent member states from accumulating excessive debt. By approving France’s austerity plans, the EU is providing a clear direction for the country to reduce its deficit and adhere to the union’s guidelines.
A Path Towards Fiscal Discipline
France’s approval of austerity measures marks an important step towards fiscal discipline. The country must now work towards reducing its new debt to 3% of economic output by 2029, as outlined in its budget plan.
By adopting a more cautious approach to deficit reduction, France is taking steps to ensure the long-term sustainability of its economy. This decision will have significant implications for the country’s economic growth and stability in the years to come.
