The European Commission today told France to cut its structural deficit next year by more than planned but gave it an extra year, until 2005, to comply with EU budget rules.
The European Union executive said Paris had to cut its structural deficit, the shortfall adjusted for economic swings, by one percentage point of gross domestic product in 2004 and a further 0.5 percentage point in 2005.
"It is recommended to reduce the cyclically-adjusted deficit by one percentage point of GDP in 2004, which implies additional deficit reduction measures of around 0.4 per cent of GDP," the Commission said.
"Through such action, the French government should put an end to the present excessive deficit situation as rapidly as possible and by 2005 at the latest."
France was given a deadline of December 15th to report back that it was implementing the measures, which go beyond the 0.7 percentage point cut in the structural deficit in the draft 2004 budget currently going through parliament.
Citing sluggish economic growth, Paris has flouted orders to bring its 2004 deficit below the EU cap of three percent of GDP by drawing up budget plans that foresee a deficit well beyond that limit next year - the third year in a row.
France's 2004 budget forecasts a deficit of 3.6 percent after a projected 4.0 percent this year and a shortfall of 2.9 percent in 2005.
The Commission admitted that weaker-than-expected growth had played a part in its decision to give France extra time to bring its deficit below EU limits.
"Even if budgetary consolidation is not necessarily harmful for growth, such a large effort may prove economically costly if undertaken in a single year, in particular given the downward revision in growth prospects," it said.