France facing heavy fines over budget excesses

France was warned today it faces heavy fines if it does not change its 2004 budgetary plans by next week.

EU Monetary Affairs Commissioner Pedro Solbes said the French 2004 budget deficit would be excessive for the third year running, putting it in clear breach of the EU budget rules.

“The French budget predicts a 3.6% deficit” so we ”have to move forward with the procedure under the treaty,” Thomas said.

EU nations imposed a 3% of Gross Domestic Product deficit limit to ensure relative budget stability within the 12 nation euro zone region.

If the 3.6% budget prediction is confirmed by a deadline of October 3, it would force the EC to take action. France is expected to have a gap of 4% of GDP this year and had a deficit of 3.1% in 2002.

“If no new measures are announced,” said Solbes, the Commission would be forced to start a punishment procedure.

At the same time, however, the Commission made it clear that reform commitments from France could stave off a confrontation.

France already is reforming its pension system. New pledges to cut health and unemployment benefits could help persuade the Commission to be lenient.

“We are considering a specific set of recommendations to France,” said Solbes’ spokesman Gerassimos Thomas. ”We hope France will cooperate.”

The EC would find it hard to ignore France’s breach of the budget rules, especially with the Netherlands vowing to take the Commission to court if it does not enforce the budget pact.

Smaller countries are furious that France could get away scot-free while they have kept down their deficits.