EU leaders have approved the Broad Economic Policy Guidelines for 2002, following a deal with France over its budget deficit. President Jacques Chirac dropped his demand to postpone France's commitment to balance its budget by 2004 and promised that tax cuts introduced by his new, centre-right government will not have an effect on the budget deficit. Denis Staunton reports from Seville
In return, the EU has softened the terms of the Stability and Growth Pact to demand only that the French budget will be "close to balance" by 2004. And it has accepted that France's promise to reduce its deficit is based on the underlying assumption that the French economy will grow by between 2.5 and 3 per cent during each of the next two years.
The Commission claimed the integrity of the pact, which governs euro zone member-states, had been respected. Officials from other member-states expressed particular satisfaction at France's promise to "ensure that any future tax cuts are deficit neutral". This means that tax cuts must be financed by measures such as public spending cuts.