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Finance Ministers Cite German, French Budget Deficits - 2003-01-21


European finance ministers have disciplined Germany and warned France about budget deficits that could undermine the euro currency.

The ministers gave Germany, the European Union's largest economy, a tough list of measures it says Berlin needs to implement, in order to take of control its budget and end its shortfall.

These include labor market reforms to boost growth. But such reforms face strong opposition from trade unions allied with the German government.

The European Union limits budget deficits to three percent of each country's economy. In a statement, the ministers said there is a risk that Germany will exceed the limit in 2003, as it did last year.

The excessive deficit procedure was first used against Portugal last year, but analysts say it is politically embarrassing for Germany because it is the architect of the EU stability pact that sets deficit limits.

The finance ministers also warned France that its deficit, which hit 2.7 percent last year, threatens to break the three percent limit this year. France wants to go ahead with tax cuts, despite poor economic growth that is threatening its revenues. French finance minister Francis Mer was quoted saying that this is not the time to block growth by cutting spending.

The 12 nations that use the euro are suffering from slow growth. In addition, the euro is at a three year high against the dollar, which could hurt exports that are important to the European economy.

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