Raffarin Expects Leniency on Deficits

France will reduce its budget deficit and boost growth next year but the European commission must be "flexible" about strict eurozone deficit rules, the French prime minister Jean-Pierre Raffarin urged yesterday.

Mr Raffarin flew to Brussels for the meeting of the commission to signal that Paris would do what it could in difficult circumstances.

"Europe will do its job, the French government will do its job," the conservative leader said after talks with Romano Prodi and his colleagues.

"My initial responsibility is to mobilise everything to increase growth and encourage employment." But the French prime minister made clear that he expected a lenient approach to the stability and growth pact, which requires eurozone members to keep their deficits to a maximum of 3% of GDP.

Both France and Germany, with unemployment over 9%, have exceeded the limit for the past two years and could face massive fines if, as is almost certain, they do so again this year.

Les Echos, the Paris business newspaper, reported yesterday that the French finance ministry feared a deficit of 3.9% this year, compared with a current official forecast of 3.6%.

In Berlin, meanwhile, a German government source said the finance ministry expected the 2003 deficit to reach 3.8%.

Mr Raffarin's call followed a controversial appeal last month by President Jacques Chirac for the terms of the pact to be temporarily "softened".

That outraged smaller eurozone countries such as Austria and the Netherlands, which are struggling to balance their books. It also fuelled a campaign for the stability pact to be reformed.

Any decision to impose fines rests with EU finance ministers and would be extremely sensitive at a time when the union is preparing to take in eight new eastern European members, many with large deficits.

But Mr Prodi stuck carefully to the formal position that repeated deficits will be punished.

"We have no choice but to apply the rules of the treaty," he said. "This has to be done with the maximum possible flexibility. The commission will apply the treaty for the common good but we need full cooperation."

France has to come up with new spending plans by early October.

Mr Raffarin also said France would be applying for money from the EU's solidarity fund, set up after the devastating flooding in Germany last year, to help pay for the damage done by this summer's forest fires and drought.