PARIS, Dec 16 - European Economic and Monetary Affairs Commissioner Pedro Solbes said on Tuesday that France's revised budget deficit targets for 2005-2007 remained too high and only partly satisfied the European Union's executive body. Solbes told French radio BFM that with a forecast shortfall of 2.9 percent of gross domestic product (GDP) in 2005, France remained perilously close to the deficit ceiling of three percent of GDP set out in the EU's Stability and Growth Pact. European finance ministers agreed last month not to pursue sanctions against France and Germany for breaching the pact for the third year in a row, in return for a political commitment to bring down the deficits. France published its revised programme, which is based on a GDP growth projection averaging 2.5 percent a year, on Monday.
"As usual, this suits us partially," Solbes told BFM. "There are positive elements and not such positive elements." Solbes said he was worried about the assumption for growth in 2003 which underpinned the projections, as well as the French government's ability to implement planned cuts in public spending. The deficit target for 2005 was also too high. "We are concerned that in 2005, we are very close to three percent. At 2.9 percent, that means that if there is a slight overshoot we can again exceed three percent in 2005," he said. "In my opinion, this is not good, just as it is not good that the deficit figure for 2007 remains relatively high." The French public finances programme aims to reduce the deficit to 1.5 percent of GDP in 2007. Separately, the German government struck a deal with opposition conservatives on Monday over a package of economic reforms and tax cuts to lift it out of an economic slump. The Commission, charged with enforcing the stability pact which underpins the euro currency, was angered by the Council of Ministers' decision to give Berlin and Paris more time to clean up their finances. Solbes said it was still waiting for legal advice on whether it can challenge the deal and would probably discuss the issue in January.
Smaller countries have complained that Germany and France, the euro zone's largest economies, were receiving preferential treatment. Meanwhile, the Commission will study the revised French figures and submit a report to finance ministers around February or March, Solbes added. "I would say that this time around, the Council of Ministers should be in agreement with the Commission," he said. "If we don't respect procedures, then it's very difficult to see how things will work in future and we risk not granting the same treatment to all member states," he said, referring to the EU's scheduled expansion in May 2004 from 15 to 25 members.//