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EUROPEAN UNION commissioner Pierre Moscovici said today that Brussels will not sanction France and Italy for missing public finance targets.
Bashing two out of the eurozone's three biggest economies would have dramatised the scale of the EU economic crisis and increased public antipathy towards the bloc.
Paris and Rome are accused by the EU commission of profligacy in their spending plans at a time when the European Central Bank and the 18-country eurozone advocate strict austerity to get their public finances into shape.
"We will decide in early March whether any further steps are necessary," said Economic and Financial Affairs Commissioner Mr Moscovici, who was previously a French Socialist Party deputy in the National Assembly.
The logic of eurozone rules is that there is a need for overall controls since "irresponsible" economic policies in one nation could pull the whole currency zone down.
However, the iron-fist austerity approach demanded and enforced by Germany and the commission has contributed to a beggar-my-neighbour downward deflationary spiral.
The commission said that the extension for Italy and France would not allow them to get away with excessive spending, insisting that they would have to push through structural changes.
"We will see to it that France and Italy push through important reforms over the next months," said commission president Jean-Claude Juncker.
"Otherwise we lose our credibility," he added without a flicker of a smile.
However, the commission tempered its criticism of Paris and Rome for not cutting their deficits quickly enough by scolding Germany, the economic engine of Europe, for being too hesitant in boosting public spending despite favourable financial circumstances.
Italy reported yesterday that unemployment rose to a historic high of 13.2 per cent in October, up 0.3 percentage points from the previous month.
Though the Italian budget will respect the EU deficit limit of 3 per cent of GDP, its overall debt is extremely high and Rome has said that it will delay balancing the budget until 2017.
France has a €21 billion (£16.7bn) cost-cutting plan for next year and announced an extra €3.6bn (£2.86bn) on Monday, but it still expects a deficit of 4.3 per cent next year.
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