PARIS, July 5: French President Nicolas Sarkozy will be in the hot seat next week in Brussels where his plans to slow French momentum toward a balanced budget have unsettled some European partners.
Germany is uneasy with Sarkozy's insistence that national governments be given a greater say in economic policy as a counterweight to the European Central Bank.
In an unusual move, the newly-elected French leader is to attend a meeting in Brussels Monday of eurozone finance ministers to outline his controversial budget policy.
While members of the eurozone pledged in April to balance their government budgets by 2010, French Prime Minister Francois Fillon on Tuesday said France would not achieve that goal until 2012.
His government also said it now foresaw a public deficit, which covers national and regional administrations as well as the social welfare account, of 2.5 percent of gross domestic product in 2007 and 2008.
France's previous administration under president Jacques Chirac pledged to slash the public deficit to 1.8 percent by next year.
But Sarkozy's master plan for reviving the French economy is based on corporate and personal tax cuts, along with lower company social charges, that are expected to cost the government as much as 13 billion euros a year starting in 2009.
French officials have argued that the 1997 Stability and Growth Pact, which sets economic performance standards for eurozone members, does allow some flexibility when governments undertake reforms designed to boost growth.
The pact, among other stipulations, holds that eurozone governments should keep annual public deficits to no more than 3.0 per cent of gross domestic product.
But governments are also expected to work towards a balance or even surplus in times of economic growth.
In Frankfurt, ECB Jean-Claude Trichet expressed concern on Thursday that some eurozone members were easing up on efforts to reduce their public deficits.
In a thinly-veiled criticism of France, Trichet said the central bank's policy-making governing council “notes with concern the pressures emerging in a number of countries to relax previous fiscal consolidation targets.
“It is imperative that all governments comply with the provisions of the Stability and Growth Pact on fiscal consolidation in economic 'good times' and that all the countries concerned honour the commitments they made at the Eurogroup meeting in Berlin on April 20,” Trichet said.
German Finance Minister Peer Steinbrueck, who has described Sarkozy's planned attendance at Monday's finance meeting as “interesting and unusual,”has said he will listen to the French president's arguments. But he warned that “there would be a problem” if Paris sought to evade its eurozone policy obligations.
Sarkozy is also expected Monday to argue for a stronger policy voice for eurozone finance ministers, known collectively as the Eurogroup, notably to offset the influence of the ECB on exchange rate movements.
Sarkozy and other eurozone political leaders have in the past complained that the bank's monetary policies underpin a strong euro and thereby dampen export performance and threaten growth.—AFP