December 13, 2018 / 10:03 AM / 8 months ago

Temporary French deficit overshoot tolerable: EU's Moscovici

PARIS (Reuters) - France’s expected overshooting next year of the European Union’s 3-percent of GDP deficit ceiling could be tolerated if it is temporary, the EU’s economic commissioner Pierre Moscovici said on Thursday.

FILE PHOTO: European Commissioner for Economic and Financial Affairs Pierre Moscovici attends a news conference at the end of a eurozone finance ministers meeting in Brussels, Belgium, December4, 2018. REUTERS/Yves Herman

France is expected to break the deficit ceiling after President Emmanuel Macron made concessions to anti-government protesters, blowing a 10 billion euro ($11.38 billion) hole in the budget.

“European rules don’t forbid a one-off and limited overshooting of the 3 percent deficit threshold,” Moscovici told the European Affairs committee in the French Senate.

“But the French government must try to limit as much as possible the slippage in 2019,” he added.

Macron announced wage increases for the poorest workers and a tax cut for most pensioners on Monday, seeking to quell a near month-long public revolt by protesters that have come to be called the “Yellow Vests” due to the high-vis yellow jackets they wear.

Though the movement started over planned fuel hikes, it has spiralled into a broader protest against the high cost of living and triggered some of the most violent street protests seen in decades in a direct challenge to Macron’s authority.

Since he announced the concessions, the government has indicated its public deficit, originally expected to be 2.8 percent of GDP next year, could swell to as much as 3.4 percent as a result of the extra spending.

However, the deficit is expected to fall sharply in 2020 because the 2019 budget includes the one-off impact of a long-planned payroll tax rebate scheme becoming a permanent tax cut at a cost of 20 billion euros.

Moscovici said that a deficit over 3 percent would not necessarily trigger a new excessive deficit procedure as long as the overshooting did not last a second year and on condition it was not greater than 3.5 percent.

Finance Minister Bruno Le Maire said on Wednesday the government would do everything possible to keep the deficit as close as possible to 3 percent.

He said he was in favor of calling on big companies to contribute to efforts to keep the deficit down, raising the possibility of pushing back corporate tax cuts planned next year.

Reporting by Myriam Rivet; Writing by Leigh Thomas; Editing by Sudip Kar-Gupta and Elaine Hardcastle

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