Frankrijk uit EU-begrotingstoezicht (en)

EUOBSERVER / BRUSSELS - EU finance ministers are set to drop a penalty procedure against France on Tuesday (30 January) for breaking the bloc's deficit ceilings, with Germany expected to follow in June.

The Ecofin meeting will give its approval of the European Commission's proposal to abolish the disciplinary action triggered in 2003 after France's budget deficit had breached the EU's limit of 3 percent of GDP.

Back in 2003, Europe's second-biggest economy recorded a deficit of 4.2 percent, but Paris managed to slash it in the following years, with the 2006 forecast suggesting a drop to 2.7 percent and further reductions this and next year.

Meanwhile, along with France, Germany is also expected to formally get off the hook as it reduced its budget deficit to under 2 percent of GDP in 2006 - one year earlier than expected.

The EU's penalty procedure against the two biggest economies in March 2005 prompted a reform of the eurozone's budgetary rules, following member states' failure to slap sanctions on Paris and Berlin despite them sinning against the budget rules for years in a row.

Member states' inaction came despite the commission as well as the EU court rulings in favor of punishment.

The revised version of the so-called Stability and growth pact still includes the basic required ceilings of 3 percent of GDP for a budget deficit and a government debt under 60 percent of GDP.

But it is more flexible in terms of penalty procedures as it allows exceptions for member states if they experience any negative growth or prove other "relevant factors."

The new rules include longer deadlines for governments to correct their deficit once the disciplinary action has been triggered - which is currently the case for ten EU countries.

The new-style pact also puts more weight on the medium and long-term spending objectives, but the commission has repeatedly complained that EU capitals should do more to respect these targets - especially during a better growth cycle enjoyed by their economies.

The message applies also for France and Germany, with economy and monetary affairs commissioner Joaquin Almunia urging both countries last week to curb their public spending from 2008 onwards.

Brussels fires back at negative euro polls

Meanwhile, Mr Almunia's spokeswoman on Monday (29 January) played down the results of a poll conducted by Financial Times and Harris agency which suggested that over two-thirds of the French, Italians and Spanish - and more than half of Germans - believe the euro has had a "negative impact" on their national economies.

She argued that citizens tend to mix their feelings about the general state of economy with their remarks on the euro, adding that she did not remember similar surveys about lira or other pre-euro currencies and people's emotions about them.

According to the poll carried out among over 5,300 respondents in Germany, France, Spain and Italy in early January, over half of the countries' citizens preferred their former currency, with almost two-thirds of Germans preferring the D-Mark.

The spokeswoman suggested one of the reasons could be that the euro's benefits are "either forgotten or ignored" while issues such as supposedly alarming inflation were played up by national media.

She went on to point out that in 1973 and the late 1980s the inflation in France was 15 percent and in Italy 25 percent, adding "This is what I call inflation, not the 2 percent that we have had now for almost ten years."