France budget to test the EU’s rules

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The European Union’s budget rules faced their biggest test in over a decade yesterday after France presented a draft 2015 budget breaking past commitments to rein its deficit back to within EU limits.

It was the second time in two years that President Francois Hollande’s government has failed to keep its budget promises and recalls the moment in 2003 when France and Germany both flouted the EU’s recently launched budget rule book.

Now the fear is the eurozone is being left behind as the US, Britain and others emerge from a prolonged slow-down. France argues that austerity would be counter-productive and that it should have two more years to master its deficits while the EU boosts investment to chase growth.

A French finance ministry source said the government had submitted its draft budget according to the official deadline.

But Finance Minister Michel Sapin this week made clear there would be no major changes from an existing draft which misses by far the 2015 deficit target of three per cent of output.

That hands the outgoing Commission of Jose Manuel Barroso the task of deciding whether to send back the draft by the end of the month and ask Paris to come up with an improved budget.

“Sending back a budget is a strong gesture, it is a major act, a huge political sanction,” one EU source said.