Germany's Hans Eichel and France's Francis Mer: EU deficit delinquents

European finance ministers, meeting this week in Luxembourg, are concerned that the French Government will be reluctant to cut spending at a time of slow growth and labour unrest.

France's state budget deficit reached 3.1% last year, just above the 3% EU ceiling, and is predicted to hit 3.7% in 2003 unless action is taken.

Such lapses are of concern to Brussels, because they could undermine financial markets' faith in the stability of the euro.

Cautious criticism

Ministers have been somewhat circumspect in their demands for French reform, however.

Germany, the eurozone's biggest economy, is also in breach of budget regulations, and has so far enjoyed forgiving treatment at the hands of Brussels officials.

Instead of setting overly specific targets, therefore, the meeting simply urged France "significantly" to expand its current plans for expenditure cuts, with progress expected before 4 October.

French Finance Minister Francis Mer agreed to the principle in advance.

But he is facing considerable political pressure at home to keep spending buoyant, since France is facing both a slowing economy and a wave of industrial action.

Rate-cut call

Eurozone finance ministers, who met late on Monday, gave a relatively upbeat assessment of the region's prospects.

They argued that the recent rise of the euro, which has hit record highs against the dollar, was helping to curb price pressures.

Jean-Claude Juncker, Prime Minister and Finance Minister of Luxembourg, said that the situation left plenty of room for a rate cut from the European Central Bank (ECB).