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France questioned by eu partners Original Source Link: (May no longer be active)    http://www.eubusiness.com/afp/031006101435.tzphomm0 http://www.eubusiness.com/afp/031006101435.tzphomm0 France on the rack as euro nations convene 06 October 2003 France faced tough questioning from its European Union partners Monday after missing a deadline to explain how it intends to get its public deficit under a euro-zone ceiling. Finance ministers from the 12 nations sharing Europe's common currency were due to meet in Luxembourg from 1700 GMT for what could be a stormy session of talks. In what is becoming a common feature of the monthly euro-group talks, French Finance Minister Francis Mer was to come under pressure for flouting the rules designed to ensure the credibility of the euro project. On June 3, the rest of the EU gave France three months to come up with measures to get its deficit below the euro-zone limit of 3.0 percent of gross domestic product (GDP). That deadline lapsed on Friday with no word from Paris. France now faces the next step in a drawn-out procedure that could ultimately lead to multi-billion-euro fines. But France shows no sign of bending, having unveiled a tax-cutting budget for 2004 that projects its public deficit to stand next year at 3.6 percent of GDP, against a forecast 4.0 percent this year. Pressure is building on the European Commission, the EU's executive arm, to force France in line with the euro rules as set out in the Stability and Growth Pact. The 1997 pact was designed to enforce budget discipline on the members of the common currency. But ironically Germany, which insisted on the deficit ceiling in the first place, has breached the pact along with France. But while Germany, and Portugal, have embarked on tough deficit-battling measures to comply with the rules, France insists that its priority must be growth rather than belt-tightening. Mer is expected to invoke an ill-defined clause in the stability pact that allows for the budget strictures to be relaxed in the event of "special circumstances". But smaller member states have ridiculed French assertions that the economic slowdown amounts to an exceptional circumstance. They are angry that, having been forced to undergo painful spending cuts to get their finances in order, the euro zone's second-biggest economy appears to be ignoring the rules. "The Commission will inform ministers of its views on the French budget for 2004, and they will discuss this for a long time," one source said ahead of the Luxembourg meeting. "Austria, the Netherlands and Spain will be the strongest in favour of a tough line against France," the source said. Austrian Finance Minister Karl-Heinz Grasser said last week he was "absolutely certain" that the Commission would recommend further action against France. "What France is doing is simply a provocation towards all the other euro zone countries. I see no opportunity for a compromise," Grasser said in an interview with the Financial Times. Dutch Finance Minister Gerrit Zalm has threatened to take the Commission to court if it fails to discipline France. The Commission will give its opinion on Wednesday, and the issue will come to a head when EU finance ministers next meet on November 4. The view of Germany, the euro zone's biggest economy, will be pivotal. Mer and his German counterpart, Hans Eichel, were due to meet in the German city of Trier on Monday afternoon before heading to Luxembourg. "Germany has yet to declare its position. If they don't do that on Monday, they will have to do so in November," another source said. Text and Picture Copyright © 2003 AFP.

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