The European Commission will propose next week ending disciplinary action against France over its excessive budget deficit, a draft proposal showed, marking an end to a long dispute with Paris over fiscal policy.
The eurozone's second-biggest economy broke the EU's budget gap ceiling of 3 percent of gross domestic product in 2002, 2003 and 2004. The EU's deficit limit is designed to curb government borrowing and underpin the euro single currency.
An attempt by the Commission to step up disciplinary action against Paris was blocked in 2003 by France and Germany, which was also in breach of the deficit limit.
As a result, the EU's budget rules, the Stability and Growth Pact, had to be revised in 2005 to give budget deficit sinners more time to bring public finances in line with EU laws. Paris managed to cut the deficit to 2.9 percent of GDP last year and the Commission's latest forecasts showed the shortfall would diminish further to 2.7 percent this year, 2.6 percent in 2007 and 2.2 in 2008.
"From an overall assessment, it follows that the excessive deficit situation in France has been corrected," said the Commission's draft proposal, to be adopted on Wednesday.
"Accordingly, the Commission recommends to the Council (of EU finance ministers) to abrogate its decision on the existence of an excessive deficit in France," the draft, obtained by Reuters, said.
The EU's excessive deficit procedure can lead to fines if the 3 percent limit is repeatedly breached and EU finance ministers' requests to reduce the shortfall are ignored, but this has never happened yet. EU finance ministers are likely formally to adopt the Commission's recommendation at their meeting in January.
The Commission said while the reduction of the French deficit in 2005 below 3 percent was a result of substantial one-off revenues, the dependence of the 2006 result on such measures was limited and "negligible or zero thereafter". "This suggests that the deficit has been brought below the 3 percent of GDP ceiling in a credible and sustainable manner," the Commission said.
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