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EU commission to warn France over budget deficit

May 21, 2008, 14:44 GMT

Brussels - The European Commission will next week caution France against breaching the euro's budget deficit limit of 3 per cent of gross domestic product, diplomats in Brussels told Deutsche Presse-Agentur dpa on Wednesday. The warning, in the form of an 'early policy advice', is expected to be agreed by the European Union executive during a meeting scheduled for May 28. According to the commission's latest economic forecasts, France's budget deficit to GDP ratio will reach the upper limit of 3.0 per cent in 2009, having risen to 2.9 per cent in 2008 and to a higher- than-anticipated 2.7 per cent a year ago. Speaking at a May 13-14 meeting of EU finance ministers in Brussels, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the executive was 'looking into the situation in France.' 'I hope that the commissioners will have made a decision on the most appropriate instrument before the next Eurogroup meeting,' he said at the time. Diplomats now say consensus has been reached on issuing an early policy advice reminding France that it needs to stick to the commitments it has made by signing up to the euro's Stability and Growth Pact. This will be the first time that the commission will have agreed on issuing a policy advice, which is a milder form of cautioning than an 'early warning' - which also requires the backing of member states. It also falls far short of a formal excessive deficit procedure, which is launched against member states found guilty of breaching the 3-per-cent rule. But it will nevertheless cause embarrassment in Paris, where the government is getting ready to assume the rotating presidency of the 27-member bloc, on July 1st. France has already backtracked from a pledge to balance its budget by 2010, with President Nicolas Sarkozy saying the country will not eliminate its deficit before 2012.

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