UPDATE 1-France says room for manoeuvre in EU stability pact
June 18, 2002 06:41 AM ET
PARIS, June 18 (Reuters) - France's new government on Tuesday said there was room for an "intelligent interpretation" of the EU's Stability and Growth Pact, which caps national budget deficits, and more emphasis should be put on economic growth.
Nicole Fontaine, industry minister in the new centre-right cabinet, said euro zone countries should respect the stability pact and its deficit limits but they still had room to manoeuvre.
Government sources meanwhile said the cabinet that was named on Monday would meet on June 27 to assess the results of an audit of public finances that could show France's deficit was bigger than acknowledged by their left-wing predecessors.
The audit is expected to estimate a public deficit for 2002 as high as 2.5 percent of gross domestic product, compared to the 1.8-1.9 percent that the previous Socialist-led government predicted.
Fontaine, a former speaker of the European Parliament, told France Inter radio that France and others in the 12-nation euro zone should seek an "intelligent interpretation" of the pact, adding that too much emphasis had been put so far on the word stability, and not enough on growth.
"I think we can consider together how we can intelligently interpret this stability and growth pact, which we will do right away," said Fontaine.
CHIRAC SUGGESTION RUFFLES EUROPEAN FEATHERS
France's new administration has promised to deliver on all pledges made by newly re-elected President Jacques Chirac, who wants to make tax cuts a priority to stimulate economic growth and postpone pledges to get rid of France's deficit by 2004.
He has suggested the 2004 deadline could be pushed back to 2007.
That idea has ruffled feathers in other European capitals nervous about tampering with a pact which was established as a guarantee of government restraint on spending in return for the European Central Bank keeping interest rates as low as possible.
"There is room for manoeuvre," Fontaine said, without giving details on what exactly she meant. "We tend to forget that this is the pact for stability and growth.
"This second part, which is complementary, has not been developed much up until now. I'd even say we haven't thought about it," she said.
"The first thing is to think together how we can develop growth and job creation thanks to this stability pact. That's the challenge for Europe."
Finance Minister Francis Mer has already said the stability pact was "not set in stone", although his ministry was quick in the wake of the comments a few weeks ago to limit the potential damage by confirming that the overall lines of the pact would be respected.
France got a warning from EU partner Germany on Monday when an unnamed official said that Paris must not miss EU targets for lower budget deficits.
Mer is due to attend talks with other EU finance ministers in Madrid on Thursday ahead of an EU summit in the Spanish city of Seville at the end of the week.
The stability pact obliged government to keep deficit within three percent of GDP or face heavy fines and to aim for balanced budget in the medium term. Subsequent discussions at EU level have produced commitments to get rid of deficits by 2004. |
