Business Irish

Thursday 20 October 2016

France refuses to cut defence spend to meet EU rules

Laurence Frost

Published 18/11/2015 | 02:30

French Prime Minister Manuel Valls arrives at the Elysee Palace in Paris. Photo: Reuters
French Prime Minister Manuel Valls arrives at the Elysee Palace in Paris. Photo: Reuters

France's Prime Minister has unapologetically warned that the country will almost certainly overshoot European Union budget targets next year.

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The country is bound to overshoot its deficit target as it boosts security spending in the wake of the November 13 Paris attacks, Prime Minister Manuel Valls said yesterday.

"Europe must understand, and it is time the European Commission understands too, that this is a fight that concerns France, but that concerns Europe, too," he said, adding: "France's commitments will be inevitably overshot."

The comments echoed French President Francois Hollande, who told the French parliament this week that defence was more important than Europe's post-crisis budget rules.

"The security pact takes precedence over the stability pact. France is at war."

A deficit target will "necessarily be exceeded" in 2016 as the government amends budget plans to hire thousands more police and gendarmes and boost their resources, Mr Valls said.

The money could not be taken from other budgets. France's 2016 budget foresees a public deficit of 3.3pc of economic output, with the shortfall falling in line with an EU limit of less than 3pc in 2017.

A Finance Ministry source said on Monday that extra security spending announced by President Hollande was likely to entail hundreds of millions of euros but less than €1bn. "It will be an extra cost on top of what we had been expecting," the source said, adding that it would be compatible with France's budget commitments to its EU partners.

The Paris attacks may also have an impact on economic growth, which was steadily recovering, by depressing tourism and retail sales at least temporarily due to security measures.

Mr Hollande said on Monday he took responsibility for any budget overshoot resulting from increased spending on security and the military, telling lawmakers that security was more important than EU budget rules.

France is unlikely to face any push back from Brussels or European partners if it does miss the targets. The Stability Pact suite of budget rules introduced in Europe after the financial crisis includes scope to give individual countries leeway on spending commitments in exceptional circumstances and have already been invoked in relation to the refugee crisis.

Irish Independent

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