The EU Food Fight Begins: Brussels Says “No” to French Proposal for Deficit Target Leniency

Francois Hollande’s new government is off to a shaky start.

The European Commission told Manuel Valls, Hollande’s new Prime Minister to “be more like Spain”, and impose more austerity to meet deficit targets. The irony of course is that Spain has failed at least three times to meet repeatedly watered-down deficit targets.

Via translation from El Pais, please consider EC Says No to Valls Deficit Request.

The flamboyant French Prime Minister, Manuel Valls, asked the European Commission to grant him leniency on meeting deficit targets in exchange for reforms, cuts to public spending, and tax breaks. Valls received yesterday the Commission response: No. No way. There will be none of that.

German Finance Minister, Wolfgang Schäuble, suggested that France had been given leeway twice already, and a third time could be counterproductive. The vice president even Economic Affairs Commission Olli Rehn, yesterday got out the glove and categorically ruled out more time to Paris.

“An extension of the deficit targets for France would be justified only if there are negative surprises. And there is nothing like that on the horizon. The eurozone is in full recovery, “he told Reuters. That view is shared by President José Manuel Durão Barroso and Jean-Claude Juncker.

Rehn cited as models for France to countries that have made reforms, such as Germany and more recently, Ireland, Latvia and even Spain, although in three cases the results still leave much to be desired.

In April, Paris must send their tax plans to Brussels. And that’s when the mess really starts.

Olli Rehn’s notion that the eurozone is in full recovery is of course laughable. As for negative surprises, expect to see plenty of them.

Mike “Mish” Shedlock