EC warns of fines for GDP breaches

The European Commission is to look at the EU's stability and growth pact rules over fines for countries breaching the deficit limit of 3% of GDP for three years in a row.

France and Germany, exceeded the threshold in 2002 and will probably do so this year, look set to do so again in 2004.

Commission spokesman Gerassimos Thomas said that fines could be imposed on countries breaching the limit for a third consecutive year any time from December 2003 to the spring of 2005.

On Friday, German chancellor Gerhard Schroeder and commission president Romano Prodi said they both wanted the EU's public deficit guidelines "interpreted in a flexible manner".

In an earlier interview Prodi that the commission would have no choice but to impose fines on France and Germany if they breached the limit for three years in a row.

"We are not policemen, but we must follow the rules." he said.