Most countries 'flouting EU rules'

Jean-Claude Trichet has warned France on spending

The European Central Bank (ECB) has warned that most countries are in danger of over-spending and breaking EU budget rules.

"Recent fiscal developments in the euro area are of great concern," the bank said in a monthly report.

"There is growing evidence that most countries will miss their budgetary target for 2003 by a significant amount."

France and Germany have faced criticism for some time over the size of their budget shortfalls, with both looking likely to breach the budget deficit limit of 3% of gross domestic product for three years in a row.

But it is the first time that the bank has indicated that many other countries in the eurozone are in a similar predicament.

Meagre economic growth - and recessions in Germany and Italy - are blamed for the disproportionately large deficits.

New leader

The trouble in the eurozone comes as the EU parliament voted in France's Jean-Claude Trichet to lead the ECB.

The committee grilled Mr Trichet for two hours on his monetary policy thinking, before voting.

Two out of 26 members opposed his appointment, while there were four abstentions.

Asked specifically about the position of his home country, Mr Trichet came out firmly on the side of fiscal discipline.

And he warned Paris that carefree spending in order to help growth could be offset by the loss of consumer and investor confidence.

On Wednesday, the outgoing head of the ECB Wim Duisenberg warned that flouting EU rules on budget deficits will damage growth prospects in the eurozone.

Speaking at what is expected to be his last appearance in front of the European Parliament, Wim Duisenberg said some countries had failed to show "sufficient determination" in meeting budget rules.

Mr Trichet is expected to take over from Mr Duisenberg on 1 November.