FRANCE took a significant step towards participation in the first rank of euro members yesterday when the Commission's statistical service gave the nod to a controversial piece of book keeping by Paris.

The head of Eurostat, Mr Yves Franchet, decided to allow the French to use the one off transfer of France Telecom pension funds to reduce its deficit figure for 1997. The transfer of £4.5 billion, arising out of the partial privatisation of the company, will reduce the projected deficit next year by 0.5 per cent.

The move should bring the deficit in line with the 3 per cent deficit target of the Maastricht criteria while France still has work to do to meet the target, without the France Telecom bonus few economists believe it would have been able to make it.

When the transfer was first mooted, there were strong objections from the Germans who saw it as a piece of dangerous creative accounting, tampering with the "objective" agreed accounting procedures of the Union.

Yesterday's decision by Eurostat, in the face of what a Commission spokesman admitted was some minority opposition from members of an advisory group from the European central banks, will copper fasten France's case.

But it may, in the long run, give rise to market nervousness about the jealously guarded independence of the Eurostat office, whose credibility is crucial to confidence in its figures. The Commission spokesman insisted again yesterday that there had been no pressure on Mr Franchet from the Commission.