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Last Updated: Monday, 1 September, 2003, 20:16 GMT 21:16 UK
France admits huge deficit breach
Jean-Pierre Raffarin
Prime Minister Jean-Pierre Raffarin wants to kick-start the economy
France has admitted that its budget deficit this year will be 4% of gross domestic product - a level way above Brussels rules on fiscal discipline.

This would be the second year in succession that France has exceeded the 3% deficit ceiling, and adds to the growing list of eurozone countries to have broken the rules.

The French Government has been particularly vocal in its calls for looser eurozone budget rules, as it is hoping to cut taxes to stimulate its flagging economy.

Others argue, conversely, that fiscal discipline is necessary in order to shore up market confidence in the euro.

Taken by surprise

Paris says it has been caught out by a slowing economy, which has trimmed tax revenues, while demanding action to kick-start growth.

The government says it is trying to position the country to take advantage of the next economic recovery.

The figure of 4% has caused some shock in France and beyond, as it is by far the most glaring breach of the EU's so-called Stability Pact.

The French Government may, however, be overestimating the fiscal danger somewhat, in order to cover itself against any eventuality.

In theory, it faces a 3 October deadline to come up with deficit-beating measures.

Germany, the eurozone's biggest economy, is in the same boat: last week, it forecast a 2003 deficit of 3.8% of GDP.


SEE ALSO:
Chirac seeks softer budget rules
14 Jul 03  |  Business
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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