European Union finance ministers appeared last night to have avoided a damaging conflict with France by agreeing that a commitment to balance budgets by 2004 should be dependent on economic growth.
The ministers were meeting in Madrid ahead of today's EU summit in Seville, which is due to approve the 2002 Broad Economic Policy Guidelines.
The Stability and Growth Pact commits all euro-zone member-states to achieve budgets that are balanced or close to balance by 2004.
Last night's deal will make France's achievement of that goal dependent on economic growth of between 2.5 and 3 per cent for the next two years. Most economists regard such a level of growth as unlikely.
The European Union Monetary Affairs Commissioner, Mr Pedro Solbes, said the EU would do all it could to accommodate France on the issue of balancing the budget.
France's new centre-right government has promised massive tax cuts, despite the fact that state finances are already in a parlous state.
France will be obliged to keep its budget deficit "close to 2 per cent" rather than below 2 per cent this year. However Paris will be required to lower the budget deficit as much as possible in 2003, particularly through public spending cuts.
The French prime minister, Mr Jean-Pierre Raffarin, warned yesterday that the budget deficit for this year is likely to be greater than expected.
He said his government had strong public backing to push ahead with its planned reforms such as tax cuts and more spending on security.
"We are working in this spirit, that of keeping our commitments to the French people," he said.
The new government plans to cut income tax by a third over five years and boost spending to fight crime.
Despite last night's deal, the row over France's budget could surface today in exchanges between Germany's chancellor, Mr Gerhard Schröder, and the French President, Mr Jacques Chirac.
Mr Schröder warned this week that all euro-zone member-states must adhere strictly to the Stability and Growth Pact. However, Mr Chirac believes that his recent election success has given him a democratic mandate to introduce economic reforms.
A Eurobarometer poll published yesterday showed that French support for the EU has fallen to its lowest level for almost 30 years.
French support for EU membership fell to 47 per cent from 50 per cent in the previous survey, conducted in the autumn of 2001, hitting its lowest level since the 1973 start of the polls.
Forty-seven per cent of French people polled were also against EU enlargement. Support for enlargement stood at 56 per cent in Ireland. The Irish were among the least well disposed to the idea of a common European defence and security policy, with opposition at 29 per cent compared with an EU average of 16.
