France has denounced the eurozone’s austerity regime as deeply misguided and issued a blunt warning to Germany and the EU institutions that demands for further belt-tightening may set off a political backlash, endangering European stability, reports The Telegraph.
“Be careful how you talk to the countries in the South, and be careful how you to talk to France,” said the French premier, Manuel Valls. “The adjustment has been brutal and it has turned millions people against Europe. It is putting the European project itself at risk.”
Mr Valls said Europe’s fiscal rules have been overtaken by deflationary forces and a protracted slump. “You cannot enforce the Treaty rigidly in these circumstances. The austerity policies are becoming absurd, and we have to examine the situation,” he told journalists in London.
The reformist French premier said the eurozone’s failure to recover risked leaving the region on the margins of the world economy, stuck in a Japanese-style trap. France had pushed through €30bn of fiscal cuts from 2010 to 2012, and another €30bn since then in an effort to comply with EU deficit rules, only to see the gains overwhelmed by the economic downturn. The deficit will remain stuck at 4.3pc of GDP in 2015. A further €50bn of cuts are coming over the next three years. “If they make us reach a 3pc deficit, the country will be totally on its knees. It’s not possible,” he said.
The warnings came amid reports the European Commission may strike down France’s draft budget for 2015, refusing to give Paris two extra years until 2017 to meet the 3pc limit. Brussels is also threatening “infringement proceedings”, a process that could ultimately lead to fines. This would put the new Juncker Commission on a dangerous collision course with both France and Italy, two of the eurozone’s big three, now closely aligned in a joint push for EMU-wide reflation and New Deal policies.
Mr Valls said France and Britain were defending Europe’s “civilizational mission and values”, together bearing the costs of military intervention in Africa and the Middle East, and this should be taken into account when judging budget breaches. “We are acting for the rest of Europe. Our military costs are more than we thought for Libya, Iraq and the Sahel,” he said.
Despite warm words for his British military allies, Mr Valls played down hopes that France might give ground on Treaty concessions for the UK before any referendum on EU membership. “We will listen to David Cameron but I don’t think Europe is ready for an upheaval of its institutions. It is dangerous to open the Treaties,” he said.
Read more of this report from The Telegraph.