France has a special responsibility as a eurozone heavyweight to take deficit reduction rules seriously, even though its budget deficit is above target, German Bundesbank President Jens Weidmann said in an interview published yesterday.
Weidmann told the Bild am Sonntag newspaper that the credibility of the new eurozone rules would be hurt if their flexibility were pushed to the limit right at the start.
“The economic developments in some countries have indeed been weaker than expected and the European rules offer in such cases a certain amount of flexibility,” Weidmann said when asked about Italy, France and Slovenia getting more time to fulfill the stability criteria.
“France, but also Germany, have a special responsibility, as heavyweights in the eurozone, to take seriously the new deficit reduction rules created last year to reduce budget deficits,” he added.
Weidmann said that France’s budget deficit was still “far above 3 percent.”
“The credibility of the new rules certainly won’t be enhanced if one were to exhaust and use up to a maximum the flexibility right at the start,” Weidmann told the newspaper.
“We definitely cannot allow the expectation to rise that at the end of the day the monetary policy will be able to resolve the problems,” he said.
The European Commission last week decided to give France two more years to slash its deficit to below 3 percent of GDP because of the country’s poor economic outlook within the recession-hit euro zone.
German Minister of Finance Wolfgang Schaeuble praised France’s reform efforts and said the decision to give France an additional two years to cut its deficit was “acceptable,” the German regional newspaper Rheinische Post said.