Issuing its annual recommendations for economic development to member states, the EU executive on Wednesday said in was in favor of removing France from Brussels' public spending penalty box after more than a decade of discontent with Paris' deficit policy.

The recommendation was perceived in France as a victory for French President Emmanuel Macron, who had been struggling to regain the trust of austerity-pushing Germany.

The European Commission formally proposed to take France out of its so-called excessive deficit procedure that was first opened back in 2009 after the start of the eurozone debt crisis.

"It's an important moment for France after nine years of a long, painful procedure and sometimes painful but necessary budgetary efforts," EU Economic Affairs Commissioner Pierre Moscovici said at a news briefing.

France out, Italy in?

The EU executive forecasts that France will log a deficit of 2.6 percent of gross domestic product (GDP) in 2017 to be followed by 2.3 percent this year, both below the bloc's 3-percent limit.

France was one of the last two eurozone nations, along with Spain, that was still under the threat of having to pay fines or having to accept sanctions for overspending.

Eyes are now turning to Italy whose populist and euroskeptic government has indicated it's willingness to ignore EU budget rules in order to push through its costly coalition treaty plans.

Brussels warned on Wednesday that the incoming Italian government must make it a priority to cut its heavy public debt.

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hg/mm (dpa, Reuters)</s>“The Commission has also taken a number of steps under the Stability and Growth Pact. The Commission recommends that the Excessive Deficit Procedure be closed for France. This would leave only one Member State (Spain) in the corrective arm of the Pact, down from 24 countries in 2011,” the statement read.

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France and Spain are last two countries in the EU, that are under the hazard of the excessive deficit procedure, which can lead to sanctions and fines.</s>BRUSSELS (Reuters) - The European Commission on Wednesday recommended closing a European Union fiscal procedure against France, nine years after it was opened, saying the country had embarked on a “solid” path towards reducing its deficit spending.

The widely expected move comes as France’s deficit dropped below the required ceiling last year and is expected to stay below 3 percent of gross domestic product this year and next.

“We believe that the trajectory of France is robust and solid,” the EU economics commissioner Pierre Moscovici told a news conference.

The EU opened the procedure against France in 2009 when it expanded its public spending in the face of the global financial crisis.

The procedure could lead to fines but the commission has so far refrained from imposing financial sanctions. EU states decide the formal closure of a procedure following a commission’s proposal.

After years of spending above the EU limits, France recorded a deficit of 2.6 percent of its gross domestic product last year, as economic growth strengthened and President Emmanuel Macron took office.

The Commission forecast that the French deficit will drop further this year to 2.3 percent of GDP and will remain below the 3 percent ceiling in 2019.

However, the country’s debt remains well above the EU limit of 60 percent of GDP at over 90 percent of the economy. France is also the EU state with the highest level of public expenditure, the commission said.

“The effort should now focus on reducing the structural deficit and on improving the quality and the structure of the public expenditure,” Moscovici said.

In a statement released after the commission’s recommendations, France’s Finance Minister Bruno Le Maire said the French government would respect its fiscal commitments and pursue reforms to facilitate growth.</s>The European Commission, the EU's executive arm, formally proposed to take France out of the so-called excessive deficit procedure that was first opened in 2009 at the start of the eurozone debt crisis.

"It is an important moment for France after nine years of a long, painful procedure and sometimes painful but necessary budgetary efforts," said EU Economic Affairs Commissioner Pierre Moscovici at a news briefing.

The European Commission forecasts that France will hit a deficit of 2.6 percent of GDP in 2017, below the EU's three percent limit.

This would be followed by 2.3 percent in 2018, then 2.8 percent in 2019, the European Commission estimated in its latest economic forecasts.

Macron saw lowering the deficit as key to earning credibility with European leaders, especially German Chancellor Angela Merkel, as he pushes ambitious reforms to the eurozone. France was one of the last two countries in the eurozone, along with Spain, still under the threat of the excessive deficit procedure, which can lead to sanctions and fines.</s>The EU officially recommended that France be removed from Brussels' public spending penalty box after more than a decade, handing a win to French President Emmanuel Macron in his push to gain the trust of austerity-pushing Germany.

The European Commission, the EU's executive arm, formally proposed to take France out of the so-called excessive deficit procedure that was first opened in 2009 at the start of the eurozone debt crisis.

"It is an important moment for France after nine years of a long, painful procedure and sometimes painful but necessary budgetary efforts," said EU Economic Affairs Commissioner Pierre Moscovici at a news briefing.

The European Commission forecasts that France will hit a deficit of 2.6 percent of GDP in 2017, below the EU's three percent limit.

This would be followed by 2.3 percent in 2018, then 2.8 percent in 2019, the European Commission estimated in its latest economic forecasts.

Macron saw lowering the deficit as key to earning credibility with European leaders, especially German Chancellor Angela Merkel, as he pushes ambitious reforms to the eurozone.

France was one of the last two countries in the eurozone, along with Spain, still under the threat of the excessive deficit procedure, which can lead to sanctions and fines.

But eyes are now turning to Italy, whose populist and eurosceptic government has promised to flout EU budget rules, which also include a 60 percent of gross domestic product (GDP) cap on public debt.

The commission's proposal on France will have to be formally endorsed by EU finance ministers at a meeting in July.</s>Emmanuel Macron has fulfilled a key campaign promise to finally get France back into line with EU budget rules, after the European Commission recommended that the country’s “excessive deficit procedure” be closed.

The move reflects the fact that France’s deficit last year fell to 2.6 per cent, making it the first time in a decade that it was under the EU’s 3 per cent benchmark. It was a period marked by repeated failings of successive French governments to respect deadlines agreed with Brussels for bringing the deficit into line.

The commission’s announcement is a boost for Mr Macron, who has linked fixing the deficit with restoring France’s credibility as an equal partner to Germany in the EU.

The French president indicated last week that France’s moves to put its house in order had given it leverage in its efforts to negotiate euro zone reforms with Berlin.

Speaking in Sofia, Mr Macron said that “I expect a lot from the German response” to Paris’ euro reform proposals.

“France has proposed, France has reformed, France has waited. This coming summer is a moment of truth,” he said.

The last time France’s deficit was below the 3 per cent level was in 2007, before the collapse of Lehman Brothers and the start of the global financial crisis.

Brussels welcomed the improvement as a strong signal of the euro area’s economic recovery. The decision on France, once endorsed by national governments in the coming weeks, will mean that only one country, Spain, is left inside the excessive deficit procedure, compared with 24 countries in 2011.

Pierre Moscovici, the EU’s economy commissioner and a former French finance minister, said that France’s “deficit reduction path is strong and clear” and “is sustainable for 2018 and 2019.”

He said that the decision meant “the end of nine long years” of France’s excessive deficit procedure, during which “difficult and painful” steps had to be taken. – Copyright The Financial Times Limited 2018
The European Commission recommends to remove France from the excessive deficit procedure which it entered in 2009.