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Last Updated: Monday, 14 July, 2003, 16:09 GMT 17:09 UK
Chirac seeks softer budget rules
President Jacques Chirac
Chirac called for "a temporary softening"
France has called for a softening of strict European budgetary rules in order to help stimulate growth in the eurozone region.

The country is once again in danger of breaching the Stability and Growth Pact which aims to keep public debt levels in check and maintain confidence in the euro.

In his traditional Bastille Day interview, President Jacques Chirac said France needed a solution consistent with the requirement for stability but which avoided the curbing of growth.

"This is not about modifying the Stability Pact. It's a case of getting the representatives of euro zone nations to examine together the terms of a temporary softening," he said.

12 member countries
Signed in 1997
Budget deficits must be within 3% of GDP
60% limit for government borrowing
European Commission can fine those in breach of pact

Under the EU's Growth and Stability Pact member countries must keep their budget deficit's below 3% of national economic output.

France, the eurozone's second biggest economy, had a public deficit of 3.1% in 2002 and the European Commission's provisional forecasts see it rising to 3.7% this year and 3.6% in 2004.

The Commission said France has not yet taken adequate measures to reduce its public deficit.

It said tax cuts and overruns in government spending were major contributors to the budget slippage in 2002.

Italian rescue plan

An Italian proposal to revive the eurozone's economy will be discussed at the Brussels meeting and at a wider gathering of EU finance ministers on Tuesday.

Aims to boost investment to 35-70bn euros annually
Increased EIB role combined with private investment
11bn euros for infrastructure over 10 years
Doubts exist that private sector will want to finance public projects

The Italian proposal would see the European Investment Bank (EIB), the EU's lending institution, increase loans for European transport and energy networks.

The Commission repeated on Monday that the eurozone economy is likely to grow by around 0.7% this year rather than at the 1% percent rate it had forecast only three months ago.

Weak growth is fuelling debate about the EU pact, with some states suggesting that spending on infrastructure or defence should be excluded from budget measures that are used to assess compliance with the rules.

EU acts on French deficit
02 Apr 03  |  Business
German budget '15bn euros short'
25 May 03  |  Business
German businesses predict recovery
25 Jun 03  |  Business

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