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Sarkozy heading for EU showdown Sarkozy pleads for deficit room
(about 11 hours later)
France's president is heading for a showdown with European finance ministers at a meeting. France cannot guarantee it will erase its budget deficit by 2010, Nicolas Sarkozy has argued, leaving the French president at odds with European policy.
Nicolas Sarkozy will ask the European Union (EU) to bend its fiscal rules to help avoid a French economic slowdown. Mr Sarkozy asked EU finance ministers in Brussels to bend its fiscal rules to help avoid a French economic slowdown.
Mr Sarkozy wants to cut French taxes, a move that means France will breach a 3% budget deficit rule set by the EU. The French leader wants to cut taxes, a move that means France will breach a rule set by the EU on public deficits.
It will be the first time a head of state has attended a meeting of finance ministers since Silvio Berlusconi went in 2004 to defend Italy's budget. Mr Sarkozy argues France needs to cut taxes by 11bn euros (£7.5bn) to tackle its spiralling unemployment problem.
Mr Sarkozy, who became president eight weeks ago, has argued that France needs to cut taxes by 11bn euros ($15bn; £7.5bn) and reform higher education in order to tackle the country's spiralling unemployment problem. 'Every effort'
Should he win the backing of EU finance ministers, then it would mean France failing to balance its books until 2012, two years later than a deadline set by the last government and the EU in April. He pleaded his case for special treatment on Monday, the first time a head of state has attended a meeting of finance ministers since Silvio Berlusconi went in 2004 to defend Italy's budget.
Mr Sarkozy is expected to meet with ministers later on Monday. He said he would try to eliminate the budget deficit by 2010 in line with other EU countries but could not guarantee this would happen until 2012.
Should he win the backing of finance ministers, effectively renegotiating an agreement made by the previous French government in April, it would give him greater room for manoeuvre to carry out his radical economic reform programme.
"I am not asking to put off the effort to consolidate public finances," Mr Sarkozy said.
"We will make every effort."
Deadline delayDeadline delay
However, critics say that the move will push France's public deficit above EU guidelines, just months after rising exports and a revival in the Eurozone economy helped it fall below the 3% limit. Critics say the move will push France's deficit above EU guidelines, just months after rising exports and a revival in the eurozone economy helped it fall below the current 3% limit.
French Prime Minister Francois Fillon confirmed last week that France wanted to delay meeting EU deficit rules until 2012.
The plan has already drawn opposition from Germany and Portugal.The plan has already drawn opposition from Germany and Portugal.
"If it were to be confirmed that France is dropping out of the so-called midterm objectives that we agreed with France, with everyone...then there will be a problem," German Finance Minister Peer Steinbrueck said."If it were to be confirmed that France is dropping out of the so-called midterm objectives that we agreed with France, with everyone...then there will be a problem," German Finance Minister Peer Steinbrueck said.
I voted for the euro, I believe in the euro. But in the end, currency is not a taboo subject Nicolas Sarkozy European Central Bank (ECB) chief Jean-Claude Trichet has also voiced concerns that a "certain member" of the EU is in favour of breaching EU budget rules.
European Central Bank chief Jean-Claude Trichet has also voiced concerns that a "certain member" of the EU is in favour of breaching EU budget rules. But Luxembourg Prime Minister Jean-Claude Juncker backed France's stance, saying successful economic reforms would be "good for Europe as a whole" not just France.
However, book balancing is not the only issue that Mr Sarkozy is likely to clash with the EU about during the meeting in Brussels. Mr Sarkozy also came under fire for his recent criticism of the ECB for allowing the euro to appreciate too much.
Last week, the French president broke with protocol to criticise the central bank for allowing the euro to appreciate too much. France claims the strong euro hurts its exports. France believes the strong euro - which has appreciated 60% against the dollar in the last six years - hurts its exports.
Over the past six years the currency has appreciated by 60% against the dollar. Some within the central bank saw the comments as a political attack on its independence.
"I voted for the euro, I believe in the euro. But in the end, currency is not a taboo subject. I want it to be of use to growth, of jobs for your children," he said during a speech in Strasbourg. ECB board member Juergen Stark said the body's ability "to preserve eurozone price stability in a credible manner would be threatened" by any form of political interference.
However the comments were seen as controversial as Germany and the central bank fought hard for monetary issues to remain free from political interference.