BRUSSELS, March 8: Eurozone economies took another battering on Friday as the European Commission threatened France with disciplinary action for breaching the bloc’s strict financial stability rules and euroland finance chiefs fretted over rising oil prices and war clouds over Iraq.

“War fears add to a fragile economic environment, already burdened with growth uncertainties and labour market developments that have hit consumer confidence,” Greek Finance Minister Nikos Christodoulakis admitted after a sombre Thursday night meeting of the 12 eurozone finance ministers. Greece is current chairman of the group.

Adding to the bloc’s anxieties is the euro’s fast rise against the US dollar which experts say has already started to hit the bloc’s exports and will almost certainly force another downgrade of eurozone’s 2003 growth forecasts.

“A negative juncture of sluggish growth and a protracted geopolitical situation” are hampering eurozone efforts to accelerate an economic rebound, admitted Christodoulakis, adding, “It is clear that growth must remain our primary target.”

“Given the situation in the US and Japan, stimulus for growth cannot be expected from outside,” the eurozone chairman warned while European monetary affairs chief Pedro Solbes pointed to a “market consensus” that eurozone growth in 2003 would be no higher than 1.3 per cent, down from earlier European Commission forecasts of a 1.8 per cent growth rate.

A European Central Bank (ECB) decision on Thursday to trim its key interest rates by 25 basis points has done little to lift the gloom. In an unusual reprimand, Christodoulakis admitted that the ECB cut, which lowers the eurozone’s benchmark refinancing rate from 2.75 per cent to 2.50 per cent, was only a “step, not a jump” in the bloc’s efforts to boost to the region’s sluggish economies.

France’s rising budget deficit — following close on the heels of similar problems in Germany and Portugal — is another blow to eurozone economic confidence.

Solbes said Paris now faced EU disciplinary action for having allowed its budget deficit in both 2002 and 2003 to overshoot the 3 per cent of GDP threshold enshrined in the eurozone stability pact. “My intention is to initiate the possibility of an excessive deficit procedure” against France, Solbes underlined after French Finance Minister Francis Mer admitted that Paris would notch up a 2003 budgetary deficit of 3.4 per cent of GDP. In 2002, France has said its budget deficit will reach the 3 per cent of GDP threshold.

The EU monetary affairs chief said eurozone members had an obligation not to breach the 3 per cent of GDP ceiling “whether there is war (against Iraq) or not.” Countries in breach of the eurozone three per cent threshold are subject to a formal — and politically embarrassing — rebuke from the European Commission and their eurozone partners. They can also be fined by the Commission.