France draws attention at EU level after expansionary policy announcement

The announcement that an EU-compatible national fiscal stance on deficit could only be reached in 2029 put France in the spotlight during the last Eurogroup meeting. The newly installed French government, led by the former EU Brexit negotiator Michel Barnier, announced last week that French public finances will be within the limit of the 3% deficit/GDP ratio enshrined in EU economic governance fundamental rules not before 2029.

The German Federal Finance Minister, Christian Lindner, was poked by journalists due to his hard-nosed approach in economic policy matters. He said to be “curious” to know how the Ministry located in rue de Bercy in Paris will “return to sound public finances.”

EU Commissioner Gentiloni encouraged optimism in a press conference, counting on Michel Barnier and his “strong support of the European commitment.”  “We are confident that this cooperation with the French authorities will function”, the outgoing Commissioner for Economy said.

Member States are invited to notify Brussels of their medium-term fiscal structural plan spanning four years and possibly extendible until seven, where they commit to a budgetary trajectory as well as public investments and reforms that ensure sustained and gradual debt reduction and sustainable and inclusive growth. The 15th of October also marks the deadline for Member States to transmit their draft budgetary plan to Brussels. Spain’s government announced that it would only be able to deliver after that date.

Minister Carlos Cuerpo broke into the meeting to propose a new mechanism “that will allow groups of member states, a minimum of three, to test new policies and instruments in a controlled environment, a type of sandbox”. The proposal follows on the heels of the former French homologue Bruno Le Maire, who proposed in February 2024 the idea to build a reinforced cooperation framework for a common European savings product.

To kickstart, Spain proposed building a new European Ratings System to help our SMEs gain credit access, increase in size, and compete at the global level. Baptized the “European Competitiveness Lab“, the mechanism, according to the Spanish government, “aims to be a catalyst for broader cooperation.”

The initiative was received rather coolly by the Eurogroup President Paschal Donohoe. “When we see initiatives like this come forward, I always have to reaffirm as president of the Eurogroup that my strong preference is for all countries to move forward together,” he stated during a press conference. “Spain put an important ingredient in the discussion, but it should encourage us all to move forward ambitiously on all countries to take the same step forward without risks for fragmentation,” he added.

The proposal will be further reviewed in November when the 20 euro-based countries will look into the progress made in implementing the Capital Markets Union roadmap.

In the margins of the meeting, the President of the European Investment Bank Nadia Calvino announced that she will present “some concrete proposals to increase our investments in equity and venture debt and to work on an ‘exit fund’ so that we can provide financing for the acquisition and listing of innovative companies at a later stage of maturity.”