(BRUSSELS) - France may need an early warning about its public finances, the European Commission warned on Monday, predicting that the French deficit was slipping dangerously towards an EU limit.

The deterioration in its public accounts could put Paris on a collision course with the commission as France prepares for its much anticipated presidency of the European Union starting in July.

France's budget deficit is set to rise higher than the government has predicted, hitting 2.9 percent of grosss domestic product (GDP) this year, the commission warned in its spring Economic Forecast.

Next year, the shortfall in the French public accounts would widen to 3.0 percent -- the maximum allowed under EU rules.

In light of those forecasts, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the situation "is a clear case for using the instruments that are at hand in such cases," which is to say sending an early warning.

"In our hypothesis, which is to say under unchanged policies, the deficit will be 3.0 percent next year, which means that France is dangerously approaching the reference level," Almunia told reporters.

"Any deviation, even the slightest, would result in an excessive deficit again," he said.

France late last month revised upwards its own forecast for the public deficit this year to 2.5 percent.

Paris is facing mounting pressure from its European partners to slash its total public deficit -- which stood at 1.2 trillion euros at end 2007 -- as it prepares to take over the six-month rotating EU presidency.

While all 15 eurozone countries committed last year to balancing their books by 2010, French President Nicolas Sarkozy has acknowledged that France might not be able to do so.

Last week, the French leader said that France expected to balance its budget instead by 2012, mostly through staff cuts in the public sector.

Earlier in April, Sarkozy unveiled a 166-point cost-cutting plan aimed at generating 7.0 billion euros in savings by 2011, most from replacing only half of retiring civil servants as well as from cuts in social, diplomatic and defence spending.

The plans failed to impress private sector economists who said it was unlikely to eliminate the public deficit even by 2012.

The French budget adopted last December shied away from deep cuts, despite warnings that the state was effectively bankrupt.

While the commission's forecasts were based on "the conventional assumption of unchanged polices," it warned that a deteriorating economic situation and an increase in social spending could pinch the finances even more than planned.

Paris will probably also not be able to count on a strong economy pumping bumper revenues into the state coffers, with the commission cutting its growth estimate for the French economy to 1.6 percent in 2008 from 1.7 percent previously.

France has long struggled to meet EU public rules but in the past could count on company from Germany in its bouts of rule-breaking.

However, Germany has since returned to budget orthodoxy and has even balanced its books, leaving France with few allies to provide support on the deficit front.

All EU countries are forecast to have deficits under the 3.0 percent limit this and next year.

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