The state-owned telephone company is to give the government Fr37.5bn (pounds 4.7bn) in the next financial year in return for the transfer of its pension liabilities to the public sector budget before it is privatised.
The planned switch of funds from France Telecom is equivalent to 0.5 per cent of France's GDP and could be enough to make the difference between success and failure in the country's efforts to qualify for the single currency. Next year is the deadline for countries to meet all the requirements set out in the Maastricht Treaty if they want to join at the 1999 start date.
Although the EU Commission has predicted that France will just hit the 3 per cent of GDP target for its government deficit, most other forecasters think lacklustre economic growth means the shortfall will be much bigger.
The French proposal has been criticised by analysts in the financial markets. Julian Jessop, European economist at investment bank Nikko in London, said: "What they are proposing is against the spirit of the Maastricht criteria. It should not be allowed by the European Commission, but it might well be."
The transfer of cash now in return for future pension payments meant the deal was equivalent to issuing government debt, and not a real reduction in the deficit at all, he argued.
A spokesman for the EU's monetary affairs commissioner, Frenchman Yves- Thibault de Silguy, said the commission had not yet taken a definitive position on the planned transfer. Officials would make an objective decision on whether the proposal would reduce the French government deficit in a sustainable way, but not before Prime Minister Alain Juppe's government had presented the full details.
The French budget, due on 18 September, is widely expected to trigger another autumn and winter of unrest as the government tries to introduce expenditure cuts that will bring its deficit below the 3 per cent ceiling. But attempts to take liberties with the budget arithmetic are unlikely to go down well in the financial markets.
The news of the French move came as British businessmen issued a plea for the UK government to take a more active part in negotiations on the single currency. A group of leading industrialists warned yesterday that ruling out membership would put Britain at a competitive disadvantage.
The normally Euro-sceptic Institute of Directors agreed. Tim Melville- Ross, director general, said: "It would be quite wrong to rule out membership irrevocably."
Chancellor Kenneth Clarke fully supported the business plea. "We in Britain, as key players in this big European market, in our modern global economy, have got to be there playing a part and discussing it and making sure our patriotic British interests are defended," he told BBC Radio.
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