The European Commission said today the budget deficits in France, Germany and Italy were close to or above the European Union limit of three per cent of output and the EU's budget policy faced "critical months".
"Besides Portugal, the budgetary situation is crucial in Germany, France and Italy," EU Economic and Monetary Affairs Commissioner Mr Pedro Solbes told a news conference.
"The deficits in these countries are dangerously close if not above of three per cent. The adjustment required by these countries in order to reach the close to balance position is substantial," he said.
Mr Solbes declined to confirm or deny reports that France may face an EU warning next month over its 2003 budget, but said he was reassured by the new German government's budget plans after talking with Finance Minister Mr Hans Eichel.
Meanwhile the European Central Bank today declined to comment on Germany's coalition government agreement urging the central bank to lower borrowing costs.
"The ECB has no comment on coalition agreements," a spokesman for the ECB said.
Germany's re-elected government called for the ECB to use monetary policy to help boost investment and growth, in a veiled call for lower interest rates.