Dutch Finance Minister Mr Gerrit Zalm said yesterday he would not accept a fudge over France's surging budget deficit and confirmed that he was rallying an EU coalition to stop Paris from getting off the hook.

France faces potentially hefty fines for breaching the 3 per cent of GDP deficit ceiling in Europe's Stability and Growth Pact, but the European Commission is trying to see if there is a way it can prevent the issue getting to such a damaging point.

"Our position is very simple. I see no special circumstances. France must bring its budget deficit back beneath 3 per cent next year," Mr Zalm said.

He was speaking on the sidelines of International Monetary Fund meetings in Dubai where many of his European colleagues were also present.

France is due to present its 2004 budget on Thursday, at which point it will be clearer how ambitious it is in terms of deficit reduction next year after a deficit it predicts will hit 4 per cent in 2003.

Once the 2004 budget numbers are public, the European Commission must fashion a recommendation to the Eurogroup of common currency zone finance ministers on whether they accept the measures that France has proposed or step closer to fines.

The European Commissioner for Monetary Affairs, Mr Pedro Solbes, also in Dubai, said he had talked to Mr Zalm and would continue to discuss various options with members of the 12 nation bloc.

"It makes sense to keep talking to see what makes sense," he said.

Mr Solbes has the job of policing adherence to the pact and is pushing for Paris to make bigger commitments to deficit reduction. - (Reuters)