France and Italy avert budget clash with Commission, Britain forced to foot extra EU budget bill

France and Italy have managed to sidestep what appeared to be an unavoidable collision with Germany regarding their 2015 budgets. The European Commission decided to accept the French and Italian budgets after both countries agreed to additional fiscal measures to cut their deficits, thus bringing them inline with EU targets.

The move came after the Commission had warned Italy and France that their budget plans would violate its fiscal rules. Both countries have said they will make further savings. Jyrki Katainen, the outgoing Commissioner for Economic and Monetary Affairs, diplomatically welcomed member states’ “constructive feedback” but indicated that the Commission would conclude on the budget plans sometime in November, essentially handing the decision over to the new Commissioner for Economic and Financial Affairs, Pierre Moscovici.

France said it would find €3.7 billion euros in new budget cuts next year, a sum which although short of the 3% deficit target, is closer than before. The new plan assumes lower interest on France’s debt, as well as new tax evasion measures.

Italy also announced last-minute budget cuts, saying that it had managed to find €4.5 billion’s worth of new measures. The Italian government’s plan still does not meet the deficit target Brussels has set, but just like France, it too will come closer. The Italian economy minister, Pier Carlo Padoan, said Italy would eliminate €3.3 billion of planned tax cuts, among other fiscal measures.

Meanwhile in the UK, Prime Minister David Cameron repeatedly insisted he would not pay the extra £1.7bn demanded for the EU budget, and vowed to ignore the 1 December deadline, after suddenly being presented with the demand during an EU summit. The volatile exchange came to a contested closure when George Osborne, Chancellor of the Exchequer, made a disputed claim that he had halved the sum owed by factoring in Britain’s budget rebates in Europe.

This was immediately challenged by the European Commission, which clarified that the UK has always enjoyed a system of budgetary rebates, and therefore a discount was always going to be applied. The UK will after all pay the amount owed in two instalments by next September, thus delaying payment several months after the general election in the country. This latest episode has caused further friction between the UK and the EU, and has given ammunition to Mr Cameron’s opponents – both from the left and the right.


The editorial team of Katoikos

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