Germany's plans to cut its budget deficit to below EU limits are risky as they are based on overoptimistic growth forecasts, the European Commission said yesterday.

But Economic and Monetary Affairs Commissioner Mr Pedro Solbes praised Berlin for its determination to reduce the deficit to under 3 per cent of gross domestic product and demanded no new budget measures.

"Our main difference concerns possible rates of growth," Mr Solbes told a news conference, adding that Germany's main forecast was for 2.5 per cent growth in 2005, against the EU executive's forecast of 1.8 per cent.

The assessment of Germany's medium-term budget plans wrapped up the Commission's annual examination of EU members, with the two largest - Germany and France - at risk of repeatedly violating the Stability and Growth Pact's budget rules.

EU finance ministers angered the Commission last year when they waived the disciplinary rules for Germany and France, and the EU executive has gone to court.

At its meeting, the Commission also continued its discussion of how to improve the bloc's economic policy. "We have reached a common agreement that there is no scope and no reason to modify any aspects of the Treaty as part of this initiative," Mr Solbes said.

The Commission also came to generally positive judgments on the budget plans of Spain, Belgium and Portugal. Germany's plan to cut its deficit, which hit 3.5 per cent in 2002 and 4 per cent in 2003, has been accompanied by measures to make the economy more flexible.

But while Germany expects the reforms to boost growth quickly, Mr Solbes said that was not guaranteed, although he could not exclude it. The German government's budget plan was subject to two main risks, Mr Solbes said.

"The first, growth can be lower than expected by the German authorities and expenditure targets may not be achieved," he said, adding that it was "reassuring that German authorities confirm their commitment to implement additional measures necessary to bring the deficit below 3 per cent in 2005."