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Sarkozy, Merkel urge EU to deny funds if deficits persist

Text by NEWS WIRES

Latest update : 2011-08-17

In a joint letter to EU president Herman Van Rompuy, French President Nicolas Sarkozy and Chancellor Angela Merkel (pictured) said the EU should block countries that do not reduce their deficits from access to the bloc's structural funds.

AFP - The European Union should cut off eurozone member states from its structural and cohesion funds if they fail to make progress on deficit reduction, France and Germany said Wednesday.

In a letter to EU president Herman Van Rompuy, President Nicolas Sarkozy and Chancellor Angela Merkel said Brussels must take a stronger role in overseeing how transfer funds are spent and ensure states meet their debt targets.

"In the future, payments from the structural and cohesion funds should be suspended in eurozone countries which do not conform to excessive deficit procedure recommendations," the pair wrote.

"These changes should be incorporated into the new rules on structural and cohesion funds to be proposed in the next multi-year financial framework," they added, in a letter prepared at Tuesday's Franco-German summit.

The Structural Funds and the Cohesion Funds are maintained by the European Union to help the bloc iron out large disparities in development and wealth across its 27 member states, which have widely varying economies.

The current budget for the various funds runs until the end of 2013, when it is due to be renewed under a new framework. Over its current seven-year lifespan it is due to spend more than 300 billion euros.

EU members, and in particular the 17 members of the eurozone single currency bloc, are supposed to keep their budget deficits under three-percent of GDP, but very few were able to under the impact of the 2008-2009 global recession.

France and Germany have vowed to get their own deficits under control by 2013, however, and the threat to structural funding will be seen as a bid to strong-arm weaker states like Greece and Portugal that are major beneficiaries.

 

 

Date created : 2011-08-17

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