France, Belgium get European Commission warning over public finances

France, the second largest economy in the eurozone, and Belgium were warned by the European Commission on Wednesday over their public finances but stop short of saying that disciplinary proceedings against the two were justified. The partial rebuke came as the EU executive declared that a procedure against Italy for its growing debt was warranted, paving the way for a long legal battle with Rome's eurosceptic government.

France posted a debt of 98.4% of its output last year, well above the EU's recommended ceiling of 60% of gross domestic product (GDP). The French deficit is also expected to increase to 3.1% of GDP this year, above the EU's 3% limit.

However, the Commission judged these deviations from requirements as temporary and praised Paris for its efforts in executing structural reforms over the past years. It concluded that a disciplinary procedure was not warranted but urged the French government to take additional fiscal measures this year to fully comply with EU rules.

Belgium, which has the EU's fifth highest public debt at 102% of GDP, was also told off for not having sufficiently reduced it, but the Commission concluded that it lacked a sufficient basis for launching a disciplinary procedure. It said that structural reforms on pensions and taxes adopted by Belgium in past years were "substantial" though some of them had a temporary negative impact on public finances.

The Commission also prepared a specific report on Cyprus's high debt of 102.5% of GDP but refrained from taking measures against it, deeming that Nicosia's efforts to address concerns were sufficient. Spain was praised for its efforts to cut its deficit and Brussels recommended the closure of existing disciplinary proceedings against Madrid that were opened in 2009. If EU member states endorse this proposal, there will be no more euro zone countries under disciplinary procedure - unless a new one is opened against Italy. 

(With inputs from agencies.)