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Last Updated: Monday, 9 July 2007, 19:52 GMT 20:52 UK
Sarkozy pleads for deficit room
French president Nicolas Sarkozy
Mr Sarkozy has already ruffled EU feathers with his views on the euro
France cannot guarantee it will erase its budget deficit by 2010, Nicolas Sarkozy has argued, leaving the French president at odds with European policy.

Mr Sarkozy asked EU finance ministers in Brussels to bend its fiscal rules to help avoid a French economic slowdown.

The French leader wants to cut taxes, a move that means France will breach a rule set by the EU on public deficits.

Mr Sarkozy argues France needs to cut taxes by 11bn euros (7.5bn) to tackle its spiralling unemployment problem.

'Every effort'

He pleaded his case for special treatment on Monday, the first time a head of state has attended a meeting of finance ministers since Silvio Berlusconi went in 2004 to defend Italy's budget.

He said he would try to eliminate the budget deficit by 2010 in line with other EU countries but could not guarantee this would happen until 2012.

Should he win the backing of finance ministers, effectively renegotiating an agreement made by the previous French government in April, it would give him greater room for manoeuvre to carry out his radical economic reform programme.

"I am not asking to put off the effort to consolidate public finances," Mr Sarkozy said.

"We will make every effort."

Deadline delay

Critics say the move will push France's deficit above EU guidelines, just months after rising exports and a revival in the eurozone economy helped it fall below the current 3% limit.

The plan has already drawn opposition from Germany and Portugal.

"If it were to be confirmed that France is dropping out of the so-called midterm objectives that we agreed with France, with everyone...then there will be a problem," German Finance Minister Peer Steinbrueck said.

European Central Bank (ECB) chief Jean-Claude Trichet has also voiced concerns that a "certain member" of the EU is in favour of breaching EU budget rules.

But Luxembourg Prime Minister Jean-Claude Juncker backed France's stance, saying successful economic reforms would be "good for Europe as a whole" not just France.

Mr Sarkozy also came under fire for his recent criticism of the ECB for allowing the euro to appreciate too much.

France believes the strong euro - which has appreciated 60% against the dollar in the last six years - hurts its exports.

Some within the central bank saw the comments as a political attack on its independence.

ECB board member Juergen Stark said the body's ability "to preserve eurozone price stability in a credible manner would be threatened" by any form of political interference.


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