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Business Briefs

EU Commission rebukes France; OECD predicts low European growth; Allianz reduces stake in Munich Re

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Bad News from Brussels for French Finance Minister Francis Mer

France faces EU disciplinary action on deficit

The European Commission initiated disciplinary measures against France for overstepping budget deficit barriers imposed by the monetary union's stability pact. The French deficit rose to 3.1 percent of its gross domestic product in 2002, just above the EU's 3 percent limit. In June, EU finance ministers will have to decide what action should be taken. France predicts that its deficit will be 3.4 percent of GDP this year, but the commission believes it will reach 3.7 percent. Germany and Portugal are also dealing with disciplinary action for breaching the 3 percent ceiling.

OECD predicts significantly lower growth in Europe

Due to the Iraq war the European economy will only grow by one percent this year, according to the Organization for Economic Cooperation and Development (OECD). While the organization had expected 1.8 percent growth in its autumn 2002 prediction, it now reckons that European economic growth will be less than 1.0 percent this year, the OECD's chief economist, Jean-Philippe Cotis, said. He commented that a recession would be less likely once the U.S.-led coalition forces gain control of Iraqi oil fields.

EU examines French guarantee for EDF utility

The European Commission decided on Wednesday to open a formal investigation into an unlimited guarantee by the French state to the state-owned EDF electricity supplier. The EU body said it doubted such a guarantee was necessary for activities not covered by public service obligations, particularly regarding the production and distribution of electricity outside France and on energy markets. The commission stated that it was not convinced that the support being provided to EDF was justified and that it had been unable to establish whether aid was compatible with market forces.

Insurer Allianz cuts stake in Munich Re

German insurance giant Allianz said on Tuesday it has cut its stake in reinsurer Munich Re to "slightly less than 20 percent" from 22.4 percent. The transaction, effective from March 31, was part of a plan announced in mid-March by the two groups to reduce their cross-shareholdings to around 15 percent each. The transactions are aimed at helping raise fresh cash for Allianz, whose financial resources have come under severe strain after it booked its first-ever net loss of €1.16 billion ($1.25 billion) in 2002.

Lufthansa to reduce flights due to SARS

Lufthansa is considering grounding planes in response to massive cancellations and a plunge in reservations, particularly in Asia, because of the spread of the pneumonia-like illness SARS. The airlines had already announced last week that it would cut flights due to the decline in air travel worldwide.