Brussels attacks French budget deficit

The European Commission yesterday launched an unprecedented attack on France for failing to cut its budget deficit, highlighting its determination to keep in check the finances of the countries using the euro.

Pedro Solbes, the European Monetary Affairs Commissioner, said: "At first sight we are worried by the budgetary targets announced by the French government. The first source of concern is the lack of clear improvement in the cyclically adjusted budget deficit position that shows clearly that the French government is postponing its fiscal consolid- ation process."

The French government said on Wednesday that it expected a public deficit of 2.6 per cent of gross domestic product both this year and next.

But that seems to fall foul of a proposal put forward by the Commission, which gave countries more time to balance their budgets, because the offer was contingent on a steady deficit reduction.

Mr Solbes said: "We are ready to accept this [an extension of the deadline], but only under the condition that these states in return accept to reduce their structural deficit, adjusted for economic conditions, by at least a half a percentage point of gross domestic product a year."

He has given eurozone countries two more years to bring their budgets close to balance. The Commission wants countries to reduce their budget deficits in yearly steps to nothing by 2006, instead of 2004 as originally agreed.

But Mr Solbes also questioned yesterday whether France, which announced measures to cut taxes and increase spending, would manage to balance its budget by the later 2006 deadline. "The second source of preoccupation is that a balanced budget position will not be reached by 2006," he said.

The French Finance Minister, Francis Mer, said on Wednesday that the deficit could still be between 0.5 and 1.0 per cent of GDP even in 2006.