Wednesday, August 25, 2004

Unexceptional measures

In its August bulletin the Bank of France has called for tougher, EU-wide measures to deal with exceptional measures to reduce their deficit. Well, being a bank, they said that they would like to see “an improved framework”.

Exceptional payments by firms, the bulletin said:

"cannot substitute for efforts in budgetary structural reform ... in fact only delays them several years, at the risk of giving the illusion that the deterioration of the public finances is being limited and to make, in this situation, the unavoidable adjustment more difficult to the countries
concerned."
Equalization payments by firms to the state have, at best, no effect at all and, at worst, a negative one, according to the Bank of France.

France, as our readers will no doubt recall, is one of the countries with the most persistent deficit problem.

The Bank of France made its statement at a particularly apposite moment. The public electricity giant, Electricit√© de France is about to pay the French state an equalization payment, that will, according to the Economics Minister and soi-disant heir apparent, Nicolas Sarkozy, go some way towards reducing France’s deficit for this year below the magical 3 per cent.

EDF is expected to pay at least eight to 10 billion euros (9.7-12.1 billion dollars), or equivalent of about 0.6 percentage points of GDP.

Just exactly what kind of an EU-wide framework does the Bank of France envisage?

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