France, five others risk breaking deficit rules: EU

Brussels - The EU has warned that France and five other countries were at risk of breaching the bloc's tough public spending rules, adding to the pressure on President Emmanuel Macron to push through tough reforms.

Brussels also sounded the alarm over Italy's high government debt in a fresh sign of concern over the eurozone's third largest economy, already buffeted by fears about its banking sector.

The budget warnings come as the youthful Macron tries to push ahead with an ambitious programme of reforms aimed at rebooting the eurozone in the wake of the Brexit vote.

But his plans risk stalling after the collapse of coalition talks in Germany placed the position of Chancellor Angela Merkel, one of Macron's most important allies, in jeopardy.

"The main message to France is the importance of correction of excessive deficit this year," Valdis Dombrovskis, the commission vice president responsible for the euro, told AFP in an interview ahead of Wednesday's release of its assessment of EU states' draft budget plans.

- Italy debt 'concern' -


Belgium, Italy, Austria, Portugal and Slovenia were also judged by the European Commission to be at risk over their deficits -- the shortfall between government revenue and spending.

France has long been in the EU's crosshairs over its deficit, but has previously insisted that the emphasis should be on growth rather than cutting spending.

However, Macron has vowed to reduce public overspending with tough reforms and spending cuts. French lawmakers approved his first annual budget with a thumping majority on Tuesday.

On Italy, Dombrovskis and EU economic affairs commissioner Pierre Moscovici are set to write to the Italian government, giving it until spring 2018 to bring things back in order.



"In the case of Italy, the persisting high government debt is a reason of concern," the European Commission said in a statement.

France and Belgium had also failed to cut public debt in line with EU rules, it said.

Despite the uncertainty caused across Europe by Merkel's woes, Brussels said it would push ahead with the release of its own proposals for the eurozone on December 6 as planned.

European Commission chief Jean-Claude Juncker has said it is important to act as soon as possible, with the bloc's economy likely to have the "wind in our sails" until the end of next year.

"We need to use good times to build an economy that is less vulnerable to economic shocks and more able to respond to them," Dombrovskis added.

The European Commission plans include a "budget line" for the eurozone, which could be used to stabilise countries in case of economic shocks, and transforming the eurozone's bailout fund into a dedicated European Monetary Fund.



Britain, which does not use the euro, was meanwhile to be lifted out of the EU's special budget supervision after almost a decade.

The news from Brussels will come as a boost to finance minister Philip Hammond as he prepares to unveil the government's annual budget against the backdrop of looming Brexit and sluggish growth.

"On what happens to be the day of Philip Hammond's budget, we have a good news for him -- we are closing the excessive deficit procedure for the UK," EU economic affairs commissioner Pierre Moscovici said.

When the EU first put Britain under surveillance in 2008, it gave London until it until 2009-10 to come into line with the rules, which limit the deficit to three percent of GDP.

But the global financial crisis put government finances everywhere under intense pressure and pushed the British deficit up, forcing Brussels to push back the deadline.

By Danny Kemp