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Eurozone ministers give France last chance to fix budget

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Eurozone ministers give France last chance to fix budget

Sapin - De Guindos Jurado - Photo EU Council

(BRUSSELS) - Eurozone ministers on Monday approved the extra three months given France, Italy and Belgium to fix their bloated budgets, but warned that "all options" remained if the overspending persisted.

The decision came a day after German Chancellor Angela Merkel warned that despite the efforts promised, reforms were "still insufficient" in France and Italy, the eurozone's second and third biggest economies.

Ministers from the 18-nation single currency bloc largely backed the European Commission's assessment of member state spending plans, a power granted the EU during the debt crisis.

The three countries were singled out by the Commission, the EU's executive branch, for "serious non-compliance" of the bloc's budgetary rules, but given until March to get spending back in line.

At the heart of the problem for France is the country's effort to cut the structural deficit that Brussels says is insufficient.

"France's structural deficit effort in 2015 will be 0.3 percent of gross domestic product, whereas 0.8 percent of GDP is required under the excessive deficit procedure," the Eurogroup ministers said in a statement.

To meet the target, the commission urged spending curbs beyond what exists in the 2015 budget ratified by French parliament.

"We need a clear process along with precise steps leading to the March deadline," a senior German official, who wished to remain anonymous, said during the ministerial talks.

France however maintains that its budget includes the necessary effort and that the commission figures are off the mark.

The "commission's assessment is a little bit dated," said French Finance Minister Michel Sapin.

"In March, we'll see much more clearly. I'm comfortable with my state spending," he said.

If the problems remain in three months, the EU warned it would enforce humiliating and unprecedented sanctions.

"All options remain on the table", Economic Affairs Commissioner Pierre Moscovici said, adding that "no country" would be an exception to the rules.

Paris is set for a deficit of 4.3 percent of GDP in 2015, way above the EU's 3.0 percent ceiling.

Four other countries -- Spain, Malta, Austria and Portugal -- were also off meeting the rules, but given more leeway than France, Italy and Belgium.

"We were the bad student three years ago," said Spanish Finance Minister Luis de Guindos.

Even though the country's deficit was high, growth and reforms "brought a positive evaluation of our government's policies," he said.

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