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Business

EU Warns of Deficit Action Against France, Germany

If Germany exceeds the 3 percent public spending deficit cap imposed by the pact ensuring the stability of the euro for a third consecutive year in 2004, Brussels may be forced to impose stiff fines or other punitive measures. Speaking to the Financial Times Deutschland, a spokesman for Monetary Affairs Commissioner Pedro Solbes said on Tuesday: "If a country that has determined it will have a budget deficit over 3 percent fails to take the necessary measures, then the Commission will have to go to the next level." The next level could include the Commission imposing mandatory prescriptions for German budgetmaking or, worse, imposing fines that could run into the billions. The latest developments came on the eve of a visit by French Prime Minister Pierre Raffarin to Brussels on Wednesday. Like Germany, France is also expected to exceed the limit for a third consecutive year, and Raffarin is expected to be taken to task for a report in the economic paper Les Echos that France will run a deficit of 3.9 percent this year and 3.7 to 3.8 percent in 2004.