France and Italy risk failing to respect European Union budget deficit rules next year while Germany seems to be on the road to compliance, EU Economic and Monetary Affairs Commissioner Mr Pedro Solbes said today.
Presenting the European Commission's Spring economic forecasts, he told a news conference the French budget position did not give grounds for revising his forecast for the better.
But he reserved his most critical remarks for Italy, which he said required an EU early warning "with a view to inducing an immediate change in policy and preventing the occurrence of an excessive deficit".
"In Italy, the budgetary situation is clearly deteriorating as the government is running out of one-off measures to bridge the gap between revenues and expenditure," Mr Solbes said.
Italian Prime Minister Silvio Berlusconi, who has just announced a major programme of tax cuts in a bid to revive a stagnant economy, said on Tuesday Italy would remain below the EU's deficit limit of three percent of gross domestic product.
But Mr Solbes said receipts from short-term expedients such as a tax amnesty reached a record level of some two percent of gross domestic product last year, and one-offs are planned to yield slightly more than one percent of GDP this year.
"In the absence of further measures, the deficit is foreseen to deteriorate by almost one per cent of GDP in both nominal and cyclically-adjusted terms, exceeding for the first time the three percent threshold," he said.
In the medium-term, the Italian situation looked even more worrying, he said, since the primary budget surplus was now at its lowest since the early 1990s, while the benefit of lower interest rates from joining the euro was coming to an end.
Mr Solbes said the new French government's pledge last week to get its deficit below the EU ceiling next year was welcome, but he injected a strong note of doubt.
"There is still a risk that the French government might fail to achieve its consolidation commitments," he said.
In one of the few bright spots, Mr Solbes said there were signs of improvement in the German budget position.
"There are still risks for 2005 but it looks as if Germany is on the road to complying with the November Ecofin (EU finance ministers) recommendations," he said.