European Union Finance Ministers have shied away from confronting France over its budget deficit, which is set to breach the controversial Stability and Growth Pact for the third year in succession next year. Following a meeting of eurozone Finance Ministers on Monday night, most yesterday expressed sympathy with France in its efforts to reduce its budget deficit without damaging economic growth. France has now been given an extra year to bring its deficit below 3pc, with Irish Finance Minister, Charlie McCreevy, saying that there was a clear recognition that France was attempting to bring its deficit under control.
France expects its budget deficit to be 3.6pc in 2004, compared with around 4pc this year. Under the rules of the Pact, Paris could be fined for breaching the budget ceiling for the third year running.
During the next two weeks, the European Commission will make recommendations to Paris about how it should get its budgetary house in order. Although Austria and the Netherlands yesterday repeated their demands for tough action against France, most ministers believe that drastic action could push the eurozone's second largest economy into recession. //www.fxcentre.com