BRUSSELS, Nov 13: Eurozone economies faced fresh troubles on Wednesday as the European Commission forecast 2002 growth at a modest 0.8 per cent and fired the first shots in an unprecedented budgetary rebuke against Germany, the 12-nation currency bloc’s biggest economy.

“Economic activity in the euro area...has failed to gain momentum since the summer,” European Monetary Affairs Commissioner Pedro Solbes told reporters.

In another blow to eurozone economies, the Commissioner said he was launching a so-called “excessive deficit procedure” against Germany following new commission forecasts showing Berlin in breach of eurozone rules which set national budget deficits at no higher than 3 per cent of GDP.

With new Commission forecasts putting Germany’s 2003 budget deficit at 3.8 per cent this year and 3.1 per cent in 2003, Berlin could not escape a formal rebuke, Solbes warned.

France, with a budgetary deficit of 2.7 per cent in 2002, rising to 2.9 per cent in 2003 would also get an “early warning” from the commission to put its financial house in order, Solbes added.

Commission monetary experts will prepare a report on the state of German finances on November 19. The study will then be scrutinized by EU finance ministers in deliberations expected to last several months.

EU governments agreed earlier this month to take similar action against Lisbon after Portugal allowed its 2001 budget deficit to balloon to 4.1 per cent of GDP.

The commission reprimand represents a political embarrassment for the eurozone’s biggest economy but few experts expect any sanctions against Berlin — or Lisbon.

German Finance Minister Hans Eichel’s promise to keep the deficit under the 3 per cent threshold next year is viewed as encouraging by EU officials.

Portugal is also widely believed to be working hard to rein in spending.

The eurozone excessive deficit procedure in theory allows EU finance ministers to impose a fine of up to 0.5 per cent of GDP on countries breaching the deficit rules.

The EU executive’s autumn economic forecast also warned that eurozone economies will grow by a modest 0.8 per cent in 2002 rising slowly to 1.8 per cent in 2003.

Earlier forecasts put 2003 eurozone growth at 2.9 per cent.

“Recovery is much slower than anticipated,” said Solbes, adding that fears of war against Iraq, a slowdown in an expected US recovery, stock market turmoil as well weak domestic demand were responsible for eurozone difficulties.