French Prime Minister Lionel Jospin was yesterday putting the finishing touches to ministry spending levels for next year and was expected to settle on a package which could constitute the smallest rise in expenditure in a decade.

"We have had two messages which look pretty rigorous - the aim for a 3 per cent public deficit in 1998 and the 1.2 per cent (rise in ministry) spending," said UBS economist Mr Erick Muller.

"If that happens it would be the smallest rise since 1987. It's never been less than 2 per cent since 1987 even if the 1997 budget bill from (former Prime Minister Alain) Juppe had aimed for lower."

Government sources said the aim is to keep the spending rise to less than 2 per cent and one newspaper said yesterday that Mr Jospin could even push for a cap of 1.2 per cent.

The focus of Mr Jospin's work this week has been to ensure the spending allocation is in line with a commitment to limit France's public deficit to 3 per cent of gross domestic product in 1998 in preparation for European monetary union, while re-balancing spending according to new priorities.

The top priority is the employment ministry headed by Mr Jospin's second-in-command, Mr Martine Aubry - who is in charge of enacting a promise by the new Socialist-led government to create 350,000 jobs for the young in the public sector over the next few years. Mr Jospin said this plan, requiring an estimated 10 billion francs in state support next year, will not require new spending and that much of the funding can come from a reorganisation of the already extensive state funds dedicated to helping employment.

Consultations were also concentrating on the biggest budget ministries, the education, defence and interior ministries, sources said.