The two countries were found to have breached eurozone rules, but rather than punishing them, the European Commission has given each until next spring to implement sweeping structural reforms.
“As a new commission, we’re not seeing it as a priority to punish countries,” said Valdis Dombrovskis of Latvia, the new vice-president in charge of the euro (and good luck to him).
The Commission said that seven eurozone countries were at risk of breaking the stability and growth pact, but the situation was most pronounced in France, Italy and Belgium.
France has not been able to get its budget deficit to within 3% of GDP. Italy and Belgium have incurred soaring public debt levels well above the limit of 60% of GDP.
Dombrovskis was clear that France was the major worry. It has twice been given space to control its spending within the eurozone’s limits, but now says it will not do so until 2017.
All three countries have written to Brussels promising to do more to comply with the rules.
“But given the commitment of the countries, the European commission opinion is to give those countries more time to implement their structural reforms,” said Dombrovskis.
He singled out labour markets reforms, closed professions systems, shifting taxation from labour to consumption and freeing up markets in goods and services.
