Brussels Gives France and Italy an Economic Reprieve

In the next three months, the center-left governments of French President Francois Hollande and Italian Prime Minister Matteo Renzi will pass controversial reforms while dealing with opposing pressure from unions, business groups and rising right-wing opposition parties. With no prospects of real economic growth or even a significant reduction in unemployment in the coming months, France and Italy's political situations will remain fragile.

When the European Commission decided on Nov. 28 to give France and Italy more time to meet their deficit reduction targets before incurring penalties, Paris and Rome sighed with relief. The new administration in Brussels is not interested in applying sanctions to the second- and third-largest economies in the eurozone and decided to wait until early March to assess whether or not Paris and Rome are doing enough to reduce their deficits. However, this extension does not mean France and Italy are off the hook; the commission understands that its credibility is at stake. The European Union is likely to show flexibility again next year, but social discontent will continue to challenge the stability of the French and Italian governments.