Britain risks breaking the EU’s 3% deficit cap this year but does not face harsh punishment as it is outside the euro zone, the European Commission said today.

French Prime Minister Jean-Pierre Raffarin has, for the first time, admitted the country is on the brink of recession.

The eurozone’s overall budget deficit in 2003 could break the fiscal rules underpinning the currency because of a larger-than-expected French deficit, the European Commission said today.

France's Budget Minister Alain Lambert said France supports the euro zone Stability and Growth pact and will respect its commitment to improve 2003 and 2004 finances, but the country's priority is to "return to growth and employment".

Prime Minister Jean-Pierre Raffarin tonight named France’s first centre-right Cabinet in five years, selecting a veteran diplomat to lead the Foreign Ministry and for the first time a woman as head of defence.