FRANKFURT (MNI) – Proposals for new rules to impose fiscal
discipline within the European Union are running into “very difficult”
legal obstacles from various members and are proving tricky to agree on,
French Finance Minister Christine Lagarde told the Financial Times in an
interview published Wednesday.
Nevertheless, Lagarde said France is committed to new budgetary
discipline, including spending cuts worth E40 billion a year that will
be included in the government’s 2011 budget to be unveiled later this
month. The cuts are intended to bring down the deficit-to-GDP ratio next
year to 6% from its expected 2010 level of 8%.
However, the finance minister added that France would not look to
reduce spending beyond the E40-billion target already announced for fear
of harming the economy. “I don’t want to break the machine,” she warned.
Still, France will stick to its goal of cutting the deficit further to
4.6% by 2012, she said.
Lagarde said that the existing EU treaty provisions allow for the
Eurozone to make their own fiscal rules, but that other EU countries —
would be members of the single currency area — are afraid of being shut
out and losing their influence.
“We have the other 10 members saying: “Why should you exclude me?
Why am I not part of the club?” she noted.
Lagarde said the UK appeared willing to accept tighter fiscal rules
within the EU, as long as it was not subject to them.
The new proposals being considered include a suspension of
financial aid or voting rights for countries whose deficits exceed the
EU limit of 3%.
Central and eastern European members have focused their objections
on the proposed financial aid suspensions, arguing that such actions
discriminated against poorer nations and could add to economic
difficulties, Lagarde noted.
“The whole question of sanctions, the timing and pattern of
sanctions, is at stake here,” Lagarde said.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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