The European Commission on Wednesday recommended disciplining France and six other countries for budget deficits exceeding EU limits.

The decision by the European Union's executive arm is expected to restrict any potential additional spending plans by the French government resulting from the 30th June-7th July election.

This would pose a challenge for the National Rally led by Marine Le Pen, which is currently leading in opinion polls, to fulfil its promises of increased public expenditure and a lower retirement age.

The snap election, initiated by President Emmanuel Macron following his party's disappointing results in the European Parliament elections, has plunged the EU's second-largest economy into political upheaval and increased its borrowing costs in bond markets, Reuters reports.

The European Commission also singled out Belgium, Italy, Hungary, Malta, Poland, and Slovakia. 

The European Union will invoke its excessive deficit procedure for the first time since suspending its fiscal rules in 2020. These rules were designed to prevent excessive borrowing during times of economic stress, such as the pandemic.

The framework has been revised to accommodate the new economic conditions characterised by high levels of post-pandemic debt.

Furthermore, in 2023, France recorded a budget deficit of 5.5% of GDP, which is forecast to slightly narrow to 5.3% this year. This remains significantly above the EU deficit limit of 3% of GDP.

In addition, French public debt stood at 110.6% of GDP. The European Commission forecasts this figure to rise to 112.4% this year and further to 113.8% by 2025. This level is nearly double the EU limit of 60%.

Paris and the European Commission will discuss the pace of reducing France's deficit and debt over the next months. Following the European Commission's proposal to Paris, a seven-year program will be suggested to facilitate a downward trajectory for France's debt.

The Commission will begin talks this Friday by presenting its proposals for potential fiscal consolidation to governments. Each government will then respond with their own scenarios until an agreement is reached.

“Whatever government is formed after the election on 7th July will face the obligation to work with the Commission to define a medium-term strategy,” said a French finance ministry official.

“Eventually it will have to produce a strategy coherent with the new Stability and Growth Pact,” the official added.

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