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EDITIONS
Tuesday, 21 January, 2003, 14:11 GMT
EU ministers rebuke spendthrift France
Paris
Storm clouds are gathering over Paris
France has felt the ire of the European Union (EU), after receiving a warning that it must fix its budget deficit by 2006 or face the consequences.

This is the second such warning in a month, after Germany was given until 21 May to rein in spending.

It is necessary that France does more

Bosse Ringholm
Swedish Finance Minister
EU finance ministers ganged up against France during a meeting in Brussels.

"There is the need for an early warning to be given alerting France in order to prevent the occurrence of an excessive deficit," a statement said.

The Ecofin meeting also ratified "procedure" to discipline Germany for its deficit.

Ministers urged Germany to push through much-needed labour reforms to boost economic growth.

France rebels

Fourteen ministers at the Ecofin meeting on Tuesday backed the rebuke to France, although the French Finance Minister, Francis Mer, abstained.

Ecofin ministers
Ministers are in no mood for compromise
Mr Mer objected to two aspects of the warning, including the 2006 deadline for achieving a virtual balancing of the budget.

He also rejected a requirement to cut the French deficit by half a percentage point of gross domestic product a year.

The French Government expects its deficit to equal 2.6% of GDP this year, but the European Commission has warned that it risks breaching the eurozone limit of 3%.

Eurozone members have signed up to a 3% ceiling in order to maintain investor confidence in the euro.

The Swedish Finance Minister, Bosse Ringholm, told reporters: "It is necessary that France does more."

Germany 'highly vulnerable'

Germany attracted the EU's displeasure in November, after forecasts indicated that Germany's deficit for 2002 would expand to 3.8% of annual economic output.

The level of growth potential is low

Ecofin
"The Council stresses again that the German economy, despite its large size, remains highly vulnerable to external shocks," the ministers said on Tuesday.

"The level of growth potential is low. It is in the hands of the German Government to raise it significantly through coherent reforms, notably of the labour market."

The rebukes for both Germany and France come against a backdrop of flagging growth in the eurozone.

Any remedial measures to rein in public spending would risk disenchanting voters in both countries.

However, if Germany fails to follow the procedure laid down by the EU, it faces fines in the future.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Patrick Bartlett
"Germany has little alternative: France, by contrast, is openly defiant.."
See also:

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