BRUSSELS, June 19 (Reuters) - The European Commission will on Wednesday propose taking disciplinary steps against France and other EU countries over allowing excessive budget deficits during the pandemic, but will announce deadlines for their reduction only in November.
The disciplinary steps, known as the excessive deficit procedure, will be the first such move since the European Union suspended its fiscal rules aimed at preventing excessive borrowing in 2020.
France had a budget deficit of 5.5% of GDP in 2023, which is expected to narrow only slightly to a gap of 5.3% this year. The EU deficit limit is 3% of GDP.
Public debt of the euro zone's second-biggest economy was 110.6% of GDP in 2023 and the Commission expects it to increase to 112.4% this year and 113.8% in 2025. The EU limit is 60%.
Talks between Paris and the Commission on how quickly to reduce France's deficit and debt will take place in the coming months.
With the far right Rassemblement National party of Marine Le Pen leading in polls to win the snap French election set for June 30-July 7, the Commission will likely be negotiating with a strongly euro-sceptic government in Paris.
Le Pen's party wants to lower the retirement age and energy prices and raise public spending, and supports a protectionist "France first" economic policy approach, and markets are already worried about the country's public finances.
Investors sold off French assets last week because of the political uncertainty, with French bond yields seeing their biggest weekly jump since 2011. Bank stocks tumbled.
According to Eurostat, 11 EU countries, including France, had a budget deficit above the EU limit of 3% of GDP in 2023. (Reporting by Jan Strupczewski Editing by Bernadette Baum)
