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Sarkozy's proposal on eurozone deficit rules meets with skepticism |
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08:09, July 10, 2007 |
French President Nicolas Sarkozy called on Monday for intelligent use of eurozone deficit rules to allow his country more time for achieving budget balance, but the proposal met with skepticism.
"I am not asking to put off the effort to consolidate finances. I am asking for intelligent and dynamic use of the stability pact, " Sarkozy told reporters through interpreter after one-hour meeting with finance ministers from the other 12 nations sharing the same currency euro.
Sarkozy said his government will try its best to meet the deadline by eliminating the budget deficit by 2010, but may need two years more due to the ongoing domestic reforms.
"We will deploy every effort to achieve that (budget balance) but at the same time we have to be honest about it ... if we don't do that, we will ask for it to be moved to 2012," he said.
The new French government planned to stimulate the national economy with a series of tax cuts, which might reduce the government revenue in the short term and slow the deficit reduction.
Under the Growth and Stability Pact, eurozone members have to keep their budget deficit under the ceiling of 3.0 percent of their gross domestic products (GDP). And they undertook in April to realize balance of budget by 2010.
In a exceptional move, Sarkozy attended the eurozone finance ministers' meeting in an effort to make his case for backing off from the promise made by the former government, while stressing that France still sticks to the ultimate goal.
"I believe in the (Stability and Growth) Pact, I believe in the necessity of the pact. I believe the reforms should be implemented within the rationale of the pact. Not because the ( European) Commission says so but because it's better to have a country that is not in debt," Sarkozy said.
In order to assure other members, Sarkozy said he made a number of concessive commitments, such as to keep deficit at 2.4 percent of GDP in 2007 rather than 2.5 percent, and below 2.4 percent in 2008. The French government will table an updated stability program in September.
The chairman of the meeting, Luxembourg Prime Minister Jean- Claude Juncker, agreed with Sarkozy's reform efforts, saying it is good news for both France and Europe.
"We are particularly pleased to see this dynamic effort to make France really a country of reform," he said, " ... it is not just something that is good for France and the French people, it is good for Europe as a whole."
But others were quite skeptical about France's call.
"It is very important, it is crucial, that France has good economic growth and figures and it is also very important that there is budget discipline in France," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said ahead of Monday's meeting.
German Finance Minister Peer Steinbrueck expressed opposition. "There is no reason to give up that commitment we made" in April, he said.
In addition, Sarkozy also pushed for more "economic governance" for the euro zone, with the main aim to give more say to the eurozone finance ministers on the currency issue, which is currently under the charge of the European Central Bank.
France was critical of the ECB's approach of basing its decision to raise interest rate on inflation pressure. The continuous raise of interest rates has helped the appreciation of the euro, which France said has hurt its exports.
Sarkozy's proposal was also opposed by Germany, who strongly supports the independence of the ECB from political interference.
Asked if the ECB's independence and the Stability and Growth Pact were in any way negotiable, Steinbrueck said, "No, they are not."
Source: Xinhua
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