Mastricht agreement and the present French growth plan

April 28, 2014 | Posted by bobbysrinivasan << back to blog

13/4/2014

When the euro zone was established all countries belonged to it made a commitment to keep their annual budget deficit at 3 percent and the accumulated debt not to exceed 60 percent. Many countries violated this and it created near bankruptcy problems in Greece, Spain and Portugal. Some countries like France was given time until 2015 by which time they were expected to bring their annual budget deficit to 3 percent. France was last year granted extra 2 years to meet the 3 percent target. But Brussels estimates that Paris will not achieve this. Figures from the French states institute showed that the budget deficit in 2013 will hit 4.3 percent.

This week Paris and Brussels exchanged blows regarding the future budget deficit. President Francois Hollande made it clear that he wants a delay in the budget deficit targets to allow room for his new growth economic plan. Euro zone itself is under great pressure because of the faltering economic growth. It appears that the Mastricht treaty will sooner or later be ignored. Oili Rehn, the EU economic commissioner in charge of evaluating euro zone budgets has publicly warned Mr. Benzi’s government that Brussels will have no choice but to cite Italy formally if it breaches the 3 percent limit.

France is under specific monitoring by Brussels because of its deficit slippage. But Mr. Hollande said I quote “It is not about making savings for the sake of savings. Above all I don’t want to undermine growth which is reviving”.

Finally the ECB and Brussels are all in or quandary as to how to discipline their member countries. The issues relate to public debt, public spending and taxes. All seem to be increasing. Only time will tell whether the Euro zone will be able to bring about discipline which it badly needs to ensure that the Mastricht treaty conditions are not violated.

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