Monday, July 09, 2007

France plans to march to its own drummer on EU budget discipline rules

Telegraph: "Sarkozy warns EU over budget plans"
Bloomberg: "European officials say Sarkozy must 'respect rules'"

French President Nicolas Sarkozy, who replaces Jacques Chirac, has tried to distinguish himself from his predecessor by adopting policies that are more free-market oriented and business friendly. However, Sarkozy’s plans also run afoul of EU spending rules—specifically those related to the budget discipline.

Sarkozy wants to implement a plan to cut taxes in France, despite the fact that the tax cut will leave deficit levels in the country too high to meet the French pledge to reduce its deficit to under 2% of the GDP (gross domestic product) by 2010.

The EU’s spending and budget discipline rules were originally drawn up in the 1990s to protect the strength and stability of the euro, which is the common currency used throughout the European Union, which is also referred to as the “eurozone.”

The Finance Ministers of member countries are urging France to abide by the rules in order to “shore up their credibility” but Sarkozy has insisted that budget discipline will happen on his terms, because it is good for growth and confidence for France, not because of prior commitments made to the EU.


Where should the line be drawn between national sovereignty and international commitments?

Does the fact that the EU countries have committed to using a common currency bind individual nations to abiding by agreed upon behaviors intended to protect the currency?

France is a powerful and comparatively wealthy member of the EU. Do you think that similar behavior (i.e., bending or breaking EU budget discipline rules) would be accepted if undertaken by newer and poorer members (e.g., Romania)?

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