BRUSSELS Feb 22 The European Commission warned
France two months before elections that its economy was out of
balance and in need of reforms as it also chided Germany and
The European Union's executive arm published in-depth
reviews on Wednesday of the economies of several countries
identified last November as having "imbalances" or "excessive
imbalances", such as large public debts, budget deficits or
France, which holds presidential elections in April and May,
had excessive imbalances, the Commission said, noting that even
though there was some improvement, it was not enough.
"While recent reforms constitute notable progress, some
policy challenges remain to be addressed and further action
would be needed, notably to increase the efficiency of public
spending and taxation, to reform the minimum wage and the
unemployment benefit system and to improve the education system
and the business environment," it said.
Germany, Europe's biggest economy, had a persistent current
account surplus that showed Germans were saving too much and
insufficiently investing. Reducing the surplus would benefit the
whole of the euro zone of 19 countries, the Commission said.
"The current account surplus increased further in 2015 and
2016 and it is expected to remain at a high level," the
"Addressing the surplus has implications on the rebalancing
prospects of the rest of the euro area because more dynamic
domestic demand in Germany helps overcoming low inflation and
ease deleveraging needs in highly-indebted Member States," the
It noted that public investment in Germany has increased in
recent years, but was still low as a proportion of GDP in
comparison with the rest of the euro zone, especially given
Germany's budget surplus and investment needs.
The Commission also warned the euro zone's third biggest
economy, Italy, it must deliver on its promises to cut its
structural budget deficit, which excludes one off items and
cyclical revenue and spending swings, by 0.2 percent of GDP by
the end of April.
The Commission said that, if Rome failed to do so, the EU
executive would launch disciplinary steps against it because
Italy would be breaking the EU's rule that public debt has to
fall every year, rather than rise.
"High government debt and protracted weak productivity
dynamics imply risks with cross-border relevance looking
forward, in a context of high non-performing loans and
unemployment," the Commission said.
"The public debt ratio is set to stabilise but is not yet on
a downward path due to the worsening of the structural primary
balance and subdued nominal growth," it said.
(Reporting By Jan Strupczewski; editing by Philip Blenkinsop)