EU says Germany unlikely balance budget by 2006 without more reforms

The European Commission says Germany is unlikely to meet the agreed euro zone deadline of 2006 for a balanced budget unless it undertakes further reforms, according to papers obtained by AFX News. In the commission's broad economic policy guidelines, due to be approved tomorrow, it called on France to get its deficit below the EU stability and growth pact's limit of 3.0 pct of GDP by 2004 "at the latest". The commission also warned that France looks set to breach the stability pact's debt threshold of 60 pct of GDP this year. It said Italy must take "measures of a more permanent character" to ensure a reduction of its deficit by at least 0.5 pct of GDP a year. The commission will approve the guidelines on member states' economic programmes along with its spring forecasts, projecting euro zone growth of 1.0 pct this year compared with 1.8 pct previously. The forecasts show Italy looks set next year to become the fourth country, after Germany, France and Portugal, to breach the deficit limit. The commission also predicts Portugal will remain in breach of the deficit threshold. It said that in 2003 German growth is likely to remain below 1.0 pct for the third year in a row. The root causes of Germany's low growth and widening growth must be tackled in tandem, it said. The commission noted that EU finance ministers have recommended that German authorities take steps to bring its deficit below 3.0 pct of GDP by 2004. On France, the commission noted that its economy grew at a faster pace than those of its main European partners due to strong job creation and an accommodative budgetary policy.