France seen near balanced budget despite crisis

By Marcel Michelson

PARIS (Reuters) - France remains on course to have its budget close to balance by 2012, despite the exceptional circumstances the European Union faces from the credit crisis, a senior presidential adviser said on Sunday.

"We are in exceptional circumstances but that does not mean that France will let its deficit run away," Claude Gueant, secretary general of the Elysee palace, told Europe 1 radio.

Discussing a statement adopted by four large European countries at a mini-summit in Paris on Saturday, Gueant said that the European Growth and Stability Pact contained a provision for flexibility in times of crisis.

"Some countries may not be able to reach the Maastricht criteria, but France aims to come close to balance at 2012. It is a priority," he said.

"If we arrive in a situation that is more exceptional, more serious, we could take other measures," he said.

Europe's most powerful leaders opened the way on Saturday for EU governments to breach deficit limits, saying the financial crisis was so severe they could waive their usual strict application of budget rules.

It was the first time the EU appeared ready to invoke a 2005 clause that allows countries to bend the rules laid down in the Stability and Growth Pact if they fall victim to exceptional events outside their control.

President Nicolas Sarkozy met the leaders of Germany, Britain and Italy on Saturday to discuss the credit crisis and draw up a list of proposals to overcome the mayhem that has pushed several European banks close to collapse.