BRUSSELS, July 15 (Reuters) - Any new French government will have to abide by the European Union's rules on debt and deficit reduction, top European Commission and German officials said on Monday as EU finance ministers met to approve a tighter fiscal policy for 2025.
Euro zone ministers endorsed an earlier agreement to slightly tighten fiscal policy next year, to help bring down inflation and strengthen public finances after additional spending related to the COVID pandemic and the energy price crisis.
Paris is in the spotlight because the European Commission, the enforcer of EU borrowing limits, put France and six other EU countries under a disciplinary procedure in June over their excessive budget deficits.
The determination of Paris to reduce its budget gap and public debt is in doubt after a snap French election delivered parliamentary gridlock earlier this month, with a left-wing alliance that promised looser budget policy gaining the most seats.
"We are aware of the institutional difficulties coming from the fact that France will have a caretaker government tomorrow, with more limited powers," European Economic Commissioner Paolo Gentiloni told reporters on entering the ministerial talks.
"It is clear there is a need for fiscal adjustment in France," he said. "It is not easy, but it is needed, it is possible. I think the path the we framed and are discussing with member states is very realistic and is not something that obliges countries to do impossible things."
Under EU rules, tweaked earlier this year, France and other EU countries have four to seven years to put their debt on a declining path. They will have to reduce their budget deficits below the EU limit of 3% of GDP much earlier.
France had a budget gap of 5.5% of gross domestic product in 2023, up from 4.8% in 2022 and above the EU's deficit limit of 3%. French public debt was 110.6% of GDP in 2023. The EU Commission expects this to increase to 112.4% this year and to 113.8% in 2025 while the EU limit is 60%.
Before the snap election, the French government had pledged to meet the EU's deficit limit of 3% by 2027. German Finance Minister Christian Lindner told reporters before the ministerial talks he expected France to abide by EU rules.
"We have sufficient rules and I expect every member state to be compliant with our fiscal rules," he said.
"It is in our best common interest to maintain the sustainability of public debt and I think every future French government will have to follow these rules as well."
Piling on pressure, France's national public audit office said the country's ailing public finances left the euro zone's second-biggest economy "dangerously exposed" in case of a new macroeconomic shock. (Reporting by Jan Strupczewski Editing by Christina Fincher)
