Main euro-zone states slammed over economies

Mr Goran Persson, the Swedish prime minister, yesterday attacked Germany, France and Italy - the euro zone's three biggest countries - for failing to prepare for euro membership and undermining the euro-zone economy.

With less than two weeks to go before Sweden's referendum on joining the euro, Mr Persson said Germany, France and Italy - which make up about 60 per cent of the euro-zone economy - should have done more to put their public finances in order and build up budget surpluses before the euro was launched.

"If they had behaved as Sweden, Finland, the UK and others during the 1990s, preparing their economies for the downturn, we should not have had this situation today," he said.

France said yesterday that it told the European Commission it expected a 2003 public deficit of 4 per cent of gross domestic product, a level that would breach EU rules for a second straight year.

"The revised forecast for the 2003 public deficit comes out at 4 per cent," the Finance Ministry said in a statement, blaming the hole in public finances on the economic slowdown.

The euro zone's downturn, and in particular Germany's economic difficulties, have been seized on by Swedish euro opponents who argue Sweden is doing better outside the common currency.

Mr Persson himself warned last week that Sweden might have to delay joining the euro if the stability and growth pact - the rules that seek to control the amounts euro-zone states can borrow - fell apart.

His difficulties were compounded yesterday by Bundesbank president Mr Ernst Welteke, who said he thought Germany would break the stability pact's limit of 3 per cent of gross domestic product in 2004 - the third year in a row.

Last month the Bundesbank warned that Germany was on course to breach deficit rules for the third year running unless it did more to cut spending to fund planned tax cuts.

However, Mr Persson yesterday insisted that the euro-zone woes were not a reason for Sweden not to join. "Certain eurozone countries are doing better then Sweden," he said.

Mr Persson said the battle to convince Swedes to join the euro was far from over even though opinion polls continue to give the No side a big lead.

Mr Persson pointed to the large number of undecided voters and said he believed the result of the September 14th vote would be very close.

The prime minister accepted that deep divisions in his own Social Democratic Party had hampered the Yes campaign. But he ruled out dismissing any of the five cabinet ministers who oppose Swedish euro membership over their views.