Not such a fait accompli after all

LATE last month, it looked as if France had done just enough to avoid getting rapped on the knuckles over its breach of Europe’s deficit rules. Two days before the European Commission was due to decide whether to request revisions to France’s 2015 budget, Michel Sapin (pictured), the French finance minister, rushed out last-minute savings worth €3.6 billion. These extra budget savings, he said, would enable the government to trim its deficit to 4.1% in 2015, a better effort than previously announced.

This would still be far from the 3% that France’s Socialist government had originally promised for next year. But it was an improvement on the 4.3% Mr Sapin had unveiled in his first version of the budget. The result looked neat. The commission held off from ordering any revisions. France saved face. And a classic variety of Brussels fudge was collectively confected.

Now, however, there are rumblings of fresh divisions over how to treat France’s rule-breaking. By November 30th, the commission is due to issue its recommendations on all member states’ budgets. In theory it can still fine France for breach of the 3% deficit rules, for an amount worth up to 0.2% of GDP, although nobody seriously expects this to happen. But disagreements among members, all of whom are new to their jobs, are making it extremely difficult to reach a consensus.

Reports in Le Figaro, a French newspaper, on November 24th suggested that the commission would issue a disapproving review of the French budget, but give President François Hollande’s government a further four months to come up with more convincing structural reforms before deciding whether to punish France formally. The German newspaper Handelsblatt, meanwhile, suggested that the commission might not even stick to its timetable this week due to ongoing rows over how to treat the French budget. A eurogroup meeting tentatively scheduled for December 1st has had to be pushed back.

Whether or not the commission sticks to its schedule, exasperation with France is at boiling point. Small countries, which have had to impose painful and politically difficult reforms in response to demands from Brussels, are furious that France has so far been treated more leniently. It has already been given two delays to conform with the 3% deficit-cap rule.

They are particularly irked by the high-handed way the French have approached deficit negotiations, presenting their 2015 budget as a fait accompli. Manuel Valls, the prime minister, insisted that France alone was responsible for drafting its budget, stating grandly that “France must be respected, it is a big country”. Mr Sapin himself told a group of foreign reporters last week that all talk of potential fines was of “no interest and no substance”, insisting that “nobody should consider themselves a parking-ticket warden”.

The irritation with the French was perhaps best expressed by Günther Oettinger, Germany’s new European commissioner, whose portfolio is supposed to be digital and the internet. To consternation and anger in Paris, he wrote in a blunt newspaper article that “it would not be credible to extend the deadline without asking for clear, concrete steps in return”. France, he said, “has not gone far enough” in reforming such areas as red tape and labour markets.

Beyond the principle of rule-breaking, the underlying reservation about the French plans seem to be twofold. First, a sense that the extra savings Mr Sapin devised are not credible, as they rely chiefly on revised forecasts of revenue and spending rather than fresh structural cuts. Second, a scepticism about Mr Hollande’s willingness or ability to go far enough on freeing up the economy and reviving growth. Much rests on a law designed to liberalise the economy by deregulating protected professions (among other measures), devised by Emmanuel Macron, his economy minister, which has yet to be unveiled. Hence talk of waiting another few months before making any definitive judgement.

The paradox is that Mr Valls’s team contains some genuine centre-left reformists who understand that the private sector needs to be freed from heavy taxes and red tape if investment is to be revived and growth to pick up. This year will be the third year of near-zero growth in France, the first time that has happened in the post-war era. And the French government has a good economic case for not increasing fiscal consolidation at this point. Yet, as Jean Pisani-Ferry, head of the government’s long-term economic-strategy unit, put it recently, there is a good reason others do not trust France: “For 15 years it has not stopped making promises that it has not kept.”