French Budget Minister Mr Alain Lambert said today it would be very difficult to bring the deficit back below a European Union ceiling of 3 per cent of gross domestic product (GDP) by 2004.
Mr Lambert said the outlook for French growth in 2003 and 2004 had worsened since euro zone finance ministers, at a meeting in June, gave France a deadline of October 3rd to announce measures to bring its public deficit back in line.
"When the last Council [of EU finance ministers] recommended returning to a deficit of less than 3 per cent as early as 2004, it was basing itself on forecast growth of more than 1 per cent in 2003 and 2.3 percent in 2004," Mr Lambert said.
"We have the honesty of recognising that growth in 2003 will be 0.5 per cent and that it will only reach 1.7 per cent in 2004. In these conditions, it seems to me very difficult to get [the deficit] back below 3 per cent as early as 2004," he said.
France announced yesterday it expected the deficit to hit 3.6 per cent of GDP in 2004, surpassing the EU deficit cap for the third year in a row. The 2004 budget bill was coupled with a commitment to cut the deficit to 2.9 per cent in 2005.
European Monetary Affairs Commissioner Mr Pedro Solbes immediately said France must do better in order to avoid disciplinary steps.
Mr Lambert said France would begin talks with Mr Solbes aimed at resolving the situation amicably, although he reiterated that France was unwilling to take any measures that would plunge its economy into recession.