European Union discussions over improving the public finances of member states are moving towards a compromise with France, according to a source at the EU's Spanish presidency.
The compromise would call for France to respect a 2004 deadline to bring its public deficit into balance "on condition that the growth scenario fits with forecasts," the source explained.
France is hard-pressed to show EU partners how it will keep recent election promises without breaking strict budget rules designed to protect the euro.
At the heart of the new centre-right government's success were a series of costly election promises - to cut taxes, loosen labour laws, crack down on crime, cut the bloated public sector payroll, increase defence spending and reform the pension system.
But the government's room to manoeuvre is limited by rules set by the EU and approved by France aimed at ensuring stability of the euro, the European single currency launched by 12 nations on January 1.
The main constraint is an obligation to keep public deficits below three percent of gross domestic product (GDP).
That level was set by the Maastrict treaty, the blueprint for European economic and monetary union, and reaffirmed in a subsequent Stabilty and Growth Pact.
Germany, which faced a reprimand over its deficit in February, escaped a formal warning by promising to bring its public finances close to equilibirum by 2004, with the help of economic growth.
On Monday a senior German government source said France and Portugal could now be in line for a formal warning.
The source said he had received information that France's public deficit would reach 2.6 percent of GDP this year, too close to the limit for Germany's liking.
AFP