France goes it alone with spending plan

The French national budget for next year, tabled yesterday, defies even the more relaxed rules on public finances in the eurozone proposed by Brussels on Tuesday.

The European Commission wants countries belonging to the single currency to reduce their budget deficits in yearly steps to nothing by 2006 (instead of 2004 as originally agreed). But the French government has proposed a deficit of €44.6bn (£28bn) or 2.6 per cent of GDP, the same as this year.

Its projections are based on a forecast that the French economy will grow at 2.5 per cent next year, which is seen as wildly optimistic by non-government economists. In other words, France also risks breaking the annual eurozone deficit ceiling of 3 per cent of GDP, regarded as sacrosanct by Brussels, the European Central Bank and, officially, by the French government itself.

The Prime Minister, Jean-Pierre Raffarin, who will defend his choices in a television interview tonight, has tried to keep all of the seemingly contradictory election promises made by President Jacques Chirac last spring. He has reduced income taxes and social charges on business and increased spending on the police and defence, but made no significant cuts in other parts of the government machine.

Business leaders had hoped the 2003 budget would signal the government's willingness to take on the public service unions and allow "natural wastage" of state jobs. Five years ago, the Socialist-led government of Lionel Jospin was told there were 500,000 unnecessary posts on the public payroll. Although 58,000 civil servants are due to retire next year, the government is proposing a cut of only 1,089 jobs.

Mr Raffarin is determined to avoid conflict with unions and public workers this autumn and winter. Business leaders and right-wing economists fear he has jettisoned the aim of leading a radical government prepared to suffer the pain of reforming the economy and state.