France wants to exclude military spending from the euro-zone's Stability and Growth Pact to enable European states to boost their defence capabilities, defence minister Ms Michele Alliot-Marie said yesterday.

Speculation has been growing that the EU's strict budget rules will be watered down because weak economic growth has put a number of countries, including France, Germany and Italy, at risk of missing the targets.

"The president has launched the idea among our partners that military spending could be excluded from the stability pact in conditions that have to be defined," Ms Alliot-Marie said. "For the past several years, everybody says we need a European defence but they don't make the required efforts. They don't do it and they argue that the deficits [that would result\] would not be compatible with the Maastricht criteria."

France, already close to the 3 per cent threshold on public deficits set by the pact, this week approved a €1 billion-a-year rise in military spending for the next five years. The centre-right Paris government now faces a multibillion euro cash call from debt-laden France Telecom, as it struggles to keep President Chirac's re-election campaign pledges to reduce income taxes and boost spending on police.

Under the Maastricht budget criteria, European Union members must keep their public deficits below 3 per cent of their gross domestic product. Governments have also pledged to balance their books by 2004.

Ms Alliot-Marie cited the September 11th attacks in the US last year and the car-bomb murder of 11 French engineers in Karachi last May as proof of the new threats facing western countries.

She said the French defence plan, which will boost military spending to 2.3 per cent of gross domestic product by 2008 compared to 1.8 per cent now, had been "a healthy shock for our partners" and she hoped they would follow France's lead. - (Reuters)