October 19, 2018 / 6:53 PM / in a month

EU urges deeper cuts to France's long-term deficit

BRUSSELS (Reuters) - The European Commission told France, Spain, Belgium, Portugal and Slovenia on Friday that their 2019 budget proposals did not meet recommended targets for cutting longer-term deficit cycles, but Paris played down the criticism.

As part of its role to police euro zone budgets and avoid crises that can threaten the currency area, the Commission sent letters to the five countries, saying they were not cutting their structural deficits as deeply as agreed.

In its letter to the French finance ministry, which was made public on Friday, the Commission wrote: “The preliminary evaluation of the Commission indicates that France’s trajectory does not respect the rhythm of debt reduction in 2019,” referring to euro zone rules.

The Commission called on Paris to clarify by Oct. 22.

Overall, the Commission was unhappy that the five countries were not cutting their structural deficits by up to 0.6 percent of gross domestic product (GDP), instead targeting a less ambitious 0.2 percent of economic output.

However, the French treasury said in a statement there was only a “minor divergence” between the Commission’s assessment of the French structural deficit adjustment in 2019.

The warnings were also mild compared to a similar Commission letter to Italy earlier this week, in which Brussels warned Rome against substantially increasing its structural deficit.

That budget proposal, signed off by Italy’s cabinet on Monday, would hike the deficit at a time when EU regulations say it should be falling, as well as boosting welfare spending and cutting the retirement age.

In the first formal step of a procedure that could lead to Brussels rejecting the budget and fining Italy, the Commission sent Rome its warning letter on Thursday.

Reporting by Robin Emmott; Editing by Toby Chopra

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