EU finance chiefs to drop deficit procedure against France

Jan 30, 2007, 9:55 GMT

Brussels - European Union finance ministers on Tuesday opened a meeting which is expected to focus on dropping a penalty procedure against France over its public deficit.

The 27-nation bloc's finance chiefs will also discuss new ways to boost the bloc's economic growth and mull over EU efforts to free Europe's businesses of excessive bureaucracy and red tape.

Finance chiefs of the 13-member eurozone Monday already agreed to end disciplinary action against France, commending Paris for using current economic 'good times' to slash its budget deficit.

France is expected to post a deficit of 2.7 per cent of gross domestic product (GDP) for 2006 and 2.6 per cent for 2007.

EU measures taken against France were put in place in 2003 after its public deficit broke the 3-per-cent deficit rule that governs eurozone economies.

Germany, another poor pupil in the past, is also expected to receive the EU's all-clear this spring.

After violating EU rules for several consecutive years, Germany reduced its budget deficit to under 2 per cent in 2006, one year earlier than anticipated.

Under EU limits, national governments have to keep their public deficits under the 3 per cent of GDP ceiling set by the EU stability pact. France, Germany and others have repeatedly broken that rule.

EU efforts to reduce the administrative burden for European businesses aim at cutting red tape by 25 per cent by 2012.

The planned simplification of EU regulation for businesses is expected to bring a 1.5-per-cent increase in the bloc's GDP and lead to more jobs and investment worth some 150 billion euro (191 billion dollar).

The EU finance ministers' meeting is taking place against a brighter-than-expected EU economic backdrop.

Eurozone ministers on Monday were upbeat about the economic outlook for the area using the common currency.

With dropping oil prices and growth prospects for the eurozone area 'probably better than expected,' growth in the eurozone area was on a good track, said Jean-Claude Juncker, who is both chairman of the euro group and prime minister of Luxembourg.

EU monetary affairs chief Joaquin Almunia said economic growth in the eurozone would be at 2.6 per cent of GDP in 2006 and was expected to see a further upturn this year.

EU economists will announce new growth forecasts next month.

The eurozone economy is currently enjoying the strongest growth since the turn of the century, pumping unexpected revenues into government coffers.

But Juncker also warned against the volatility of oil prices and excessive exchange rates. Wage increases remained another matter of concern, he said.

Ministers are also expected to confirm that none of the euro-candidate nations has yet met all of the strict entry criteria.

Countries in line for adopting the euro are the Czech Republic, Estonia, Cyprus, Latvia, Hungary, Malta, Poland and Slovakia.

Slovenia is so far the only new EU member that joined the eurozone in January 2007. Lithuania's bid to join the club was rejected by the EU because the country's inflation rate was considered too high.

EU finance chiefs will also discuss the economic effects of new plans to tackle climate change and diversify EU energy supply.