EU ministers seek deficit cuts from France

France will today be pressed by its EU partners to do more this year to cut a budget deficit that has broken EU limits.

France will today be pressed by its EU partners to do more this year to cut a budget deficit that has broken EU limits.

Euro zone finance ministers, who agreed the recommendation that will be finalised at a wider EU meeting today, also sounded upbeat on the region's economic outlook and repeated that a strong and stable euro was in their interests.

But with budgets tight, finance ministers are relying on the European Central Bank, to deliver a more speedy shot in the arm to the European economy by cutting interest rates when it meets on Thursday.

France is pressing on with pensions reforms that have provoked strikes to cope with the budget burden that an ageing population will place in the future. But it is loath to cut spending or scrap planned tax cuts at a time of slow growth.

READ MORE

With Germany also above EU deficit limits and struggling to pull its economy back from the brink of recession, euro zone ministers refrained from adding to France's political woes by setting too precise a target for deficit cuts this year.

Still, they said it must reduce its underlying deficit, which strips out the impact of economic swings, by more than planned and ensure the nominal deficit was below the EU limit of 3 per cent of gross domestic product by 2004 at the latest.

France's deficit reached 3.1 per cent in 2002. The Commission said it could hit 3.7 per cent in 2003 and 3.5 per cent in 2004 if Paris does not take measures put its house in order.