The European Commission today again warned Germany's budget deficit could rise close to a ceiling set in EU rules and told France, Italy, and Portugal they were running high deficits.
Nine days after European Union finance ministers over-ruled its bid to send the bloc's largest economy a formal warning, the Commission said rising unemployment risked driving the German deficit close to 3 per cent of gross domestic product.
That is the limit laid out in Europe's Stability and Growth Pact, designed to safeguard monetary union. The EU executive's latest warning keeps pressure on Germany to pursue budget consolidation, as it pledged last week.
Rising joblessness threatens to undo much of the considerable employment gains of the last few years and to bring Germany's budgetary position close to the treaty's 3 per cent reference value, the Commission said.
The comments came in an annual assessment of the implementation of broad economic policy guidelines given to EU countries that generally endorsed the policy mix across the region at a time of slowing growth.
The main conclusions of the report are that macroeconomic policies adapted appropriately to the worsening macroeconomic performance in 2001, a Commission statement said.
The report said inflation had been on a clear downward trend since May 2001 and core inflation, which strips out energy and unprocessed food prices, may have peaked in October 2001.