Zalm laakt passieve houding Commissie inzake budgettekort Frankrijk (en)

EUOBSERVER / BRUSSELS - France has won more time in its battle with the European Commission over its breach of the rules that underpin the euro.

In late night talks tonight (3 November), the eurogroup - the finance ministers of the 12 countries that share the euro - decided to postpone any decision on what to do with France until its next meeting, scheduled for the 24 November.

France is in hot water with the Commission as well as its peers for its repeated failure to bring its budget deficit below the EU's ceiling of three percent of GDP.

The Commission recently gave France an extra year to comply with the rules - known as the Stability and Growth Pact - but also insisted that it make bigger cuts than it currently plans. Paris rejected the Commission recommendations.

But French finance minister Francis Mer yesterday unveiled new measures to reduce France's deficit. These measures - as yet unspecified - will be presented to the Commission and the Council in time for the next meeting.

French sources indicated that Mr Mer had presented a "credible path" towards satisfying the Commission's demands. But, according to a French official, Mr Mer repeated to his colleagues that the Commission's current demands on France are "untenable".

Speaking for the Presidency, Italian finance minister Giulio Tremonti said that the majority of member states welcomed the French initiative - with the exception of three countries - the Netherlands, Austria and Finland.

No U-turns in the Treaty

The Dutch finance minister, Gerrit Zalm, is especially angry at the postponement.

Speaking to reporters before the meeting, he said, "I think the Treaty should be executed strictly _ if countries don't keep to treaties, it will be negative for the EU economy". He aded, "there is no provision for U-turns in the Treaty".

After the meeting, diplomatically described as "wide-ranging" by Mr Tremonti, a spokesman for Mr Zalm told the EUobserver, "we haven't made any progress. Things look the same from a Dutch perspective as they did before".

Nevertheless, on his way in to the meeting, Mr Zalm did drop his threat to take legal action against the Commission for not proposing sanctions against France.

The Austrian finance minister, Karl-Heinz Grasser, declared himself "absolutely not" prepared to compromise on this issue.

He said he agreed with Wim Duisenberg, former President of the European Central Bank, that "we have made a contract with every euro zone citizen, and this is why it is so sensitive".

Controversy rolls on

The controversy now moves on to the ECOFIN council of finance ministers, which begins early today (4 November).

This group includes the 12 countries that share the euro, as well as the UK, Sweden and Denmark - member states which remain outside the euro zone. It is only this group that can make formal decisions, but it is expected to endorse the eurogroup's decision.

The ECOFIN council will mainly be discussing France's budgetary situation, but will also touch on the growing pensions crisis in the EU and accounting standards.

In addition, the 15 EU finance ministers will be joined informally by finance ministers from the acceding countries. They will discuss the pre-accession economic programmes (PEPs) of these future EU members.