EU's incoming economic chief Moscovici ready to fine France if necessary

[October 08, 2014]  By Jan Strupczewski

BRUSSELS (Reuters) - France's Pierre Moscovici, the EU commissioner-designate who will take charge of policing budget discipline in the euro zone, said he was ready to step up disciplinary action against Paris for not respecting its obligations under EU budget rules. 

In written answers to the European Parliament's economic and monetary affairs committee that must approve him for the job, the former finance minister said it was a matter of credibility for the Commission as the guardian of EU laws.

The answers were published by Greens EU lawmaker Sven Giegold, a member of the economic affairs committee.

EU finance ministers asked France last year to cut its budget deficit to below the EU ceiling of 3 percent of gross domestic product by the end of 2015, granting it a two-year extension from an original deadline for 2013.

But on Sept. 10 France said it would not meet the extended deadline either, and instead was aiming for 2017. Many other euro zone countries that imposed painful reforms and austerity during the sovereign debt crisis in order to meet EU rules saw that as a defiant stance that the rules do not apply to France.

"I will not hesitate to step up the procedure for any country failing to take the necessary action, applying equal treatment to all, big or small, and assessing each and every one on its own merit, without any exception," Moscovici wrote.

"This is a matter of credibility, not only for the Commission and the commissioner in charge, but for the whole euro area."

Moscovici, who was finance minister in France's Socialist government until six months ago, faces suspicion, especially in Germany, that his nationality would make him more lenient toward the euro zone's second-biggest economy. He sought to dispel such concerns in his answers to parliament.

"For countries not respecting the deficit criterion, and where the non-correction of the excessive deficit is due to deliberate lack of appropriate efforts and so-called 'effective action', this can, and in my view should, be ground for applying sanctions foreseen in the EU legislation," Moscovici said.

Stepping up EU disciplinary action against France would mean fining Paris 0.2 percent of GDP, or some $5 billion - the first time such action had been taken since the euro was created - and then issuing "notice" to the French government, setting a new timetable for deficit reduction and measures it has to take.

For this to happen, the Commission and EU finance ministers would have to conclude that France did not take effective action to reduce its structural deficit - a figure that does not depend on the rate of economic growth in a given year.

The improvement in the deficit required by the EU was 0.8 percent of GDP in both 2014 and 2015. France plans to cut it by 0.1 and 0.2 percent respectively.

(Editing by Alastair Macdonald and Susan Fenton)

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