France would not meet a deadline to adopt corrective measures to cut its excessive deficit and faced further disciplinary action, the EU said today.
However, European Economic and Monetary Affairs Commissioner Mr Pedro Solbes also said Paris was beginning to show signs of greater realism about cutting its deficit and might yet avoid sanctions.
The French deficit is set to breach the EU treaty limit of 3 per cent of gross domestic product for the third straight year in 2004.
"If on October 3rd it is confirmed that France has not met the recommendations made, the Commission and Council will have to move on the next step in the procedure applicable in the case of excessive deficits," he said.
Mr Solbes said the same rules applied to France as to any other country and stressed he had no interest in applying disciplinary measures against Paris if it could be avoided.
The EU executive had yet to decide whether a let-out clause permitting France to run a higher deficit because of as yet undefined "special circumstances" could be applied, he said.
France last week said it expected the deficit to fall to 3.6 per cent of GDP in 2004 after 4 per cent in 2003, triggering a warning from Brussels that it could face disciplinary procedures for busting the deficit cap three years in a row.