The European Commission on Wednesday gave major economies France and Spain extra time to trim their deficits as it laid down economic targets for European Union (EU) nations that desperately need growth and jobs in the fallout from the debt crisis.
The crisis has seen Brussels gain additional powers to ensure EU member states toe the line to avoid future trouble — just as well, when 20 of the 27 have been put under surveillance for breaching the bloc’s public deficit and debt rules, respectively at three percent and 60 percent of gross domestic product (GDP). Topping the problem list, France, the EU’s second-largest economy struggling in recession will have to step up the pace of reforms, including those in its costly pension system, if it is to get back on track, the commission said.
Spain, the Netherlands, Poland, Portugal and Slovenia should all be given extra time to cut their deficits, the commission said, while recommending that Malta be placed under scrutiny and sharply criticised Belgium for failing to do enough to trim its deficit.
In France, measures should be taken “by the end of this year to reform the pension system and ensure it is in equilibrium by not later than 2020,” the commission said.
As an ageing population adds to the pressure, the French government will have to adjust pension payments, the retirement age — already on the rise — and generally reduce the system’s overall costs, all at the same time so as not to increase burden on employers. Given an additional two years to put its fiscal house in order, such pension and labour market reforms must get France from an expected budget deficit of 3.9 percent this year to 3.6 percent in 2014 and 2.8 percent in 2015, it said.
Current estimates put the deficit — the shortfall between government revenue and spending — at 3.9 percent this year and 4.2 percent next, with the economy set to shrink 0.1 percent in 2013.
