France will miss EU deadline to cut excessive deficit, says Solbes

France will not meet a looming European Union deadline to cut its excessive budget deficit, but it still has a chance to avoid penalties, the man in charge of enforcing EU budget rules said yesterday.

Both European Economic and Monetary Affairs Commissioner Mr Pedro Solbes and French finance minister Mr Francis Mer made clear that Paris would not adopt corrective measures before Friday's deadline set by EU finance ministers.

In a gesture to small euro-zone states that have balanced their budgets, Mr Solbes told the European Parliament he would not flinch from applying the disciplinary rules of the EU's Stability and Growth Pact to the French if necessary.

But he left the door open for Paris to avoid possible fines if it takes further measures over the next four months to curb the shortfall.

"France will not meet the deadline set by Council (of Ministers) of October 3rd for the adoption of corrective measures," Mr Solbes told parliament's Economic and Monetary Affairs Committee.

A few hours later, Mr Mer confirmed Paris would not change its 2004 budget, unveiled last week, before the deadline.

The French deficit is set to breach the EU limit of 3 per cent of gross domestic product for the third straight year in 2004.

The budget forecasts a 3.6 per cent shortfall after a projected 4 per cent this year. But Mr Solbes said Paris was beginning to show signs of greater realism and ambition in curbing its deficit and could still avoid EU sanctions.

"If on October 3rd it is confirmed that France has not met the recommendations made, the Commission and Council will have to move on the next step in the procedure applicable in the case of excessive deficits. That does not yet mean any specific decision for sanctions to be applied, but the procedure is being followed by the Commission, which could lead to sanctions," said Mr Solbes.