Pressure on France to reduce deficit in line with EU target

German finance minister Wolfgang Schäuble has warned his new French counterpart, Michel Sapin, that the rest of Europe expects Paris to stick to its agreed timetable to reduce its deficit.

After French president François Hollande appointed him last week, Mr Sapin called for more time to bring France’s deficit – 4.3 per cent of national output last year – in line with the EU’s 3 per cent ceiling. Yesterday, on his first visit to Berlin, he was less outspoken, calling for “a balance between the necessary respect for commitments and growth”.

“We all know the way out of the crisis will be, first of all, for us to stick to our commitments and secondly through higher economic growth,” he said at a joint press conference with Mr Schäuble.

"France knows its responsibility," said the German finance minister, adding that sustainable growth and stable finances were "not alternatives but two sides of the same coin".

The European Commission has already put back France’s deadline for meeting the 3 per cent limit, most recently in September, when Paris vowed to reduce its deficit to 3.6 per cent of GDP this year and 3 per cent next.

But the new French administration has signalled it wants more time, prompting resistance from Eurogroup chief Jeroen Dijsselbloem and economic affairs commissioner Olli Rehn. "France got a second delay just nine months ago," Mr Rehn told Der Spiegel , noting that delays were usually granted after unexpected economic events. "I can't see such unexpected economic events here – quite the opposite."

France's new prime minister, Manuel Valls, will set out a plan to reverse years of economic stagnation in a speech to parliament. After voters punished the ruling Socialists in recent local elections, the new government is now being squeezed by domestic and European demands.

Aware of this dilemma, Berlin has begun a search for ways to offer Paris deficit concessions without attracting demands for similar deals from Italy and others.