The European Commission has removed France and Germany from a list of countries in breach of its deficit limit but warned it would remain vigilant over their public finances.
EU economic affairs commissioner Joaquin Almunia said that in light of efforts by the two countries to reduce their deficits, and a court ruling upholding Brussels' right to police their finances, 'it would appear that no further steps are required at this point'.
France and Germany are on course to breach the public deficit ceiling laid down in the EU's Stability and Growth Pact - 3% of gross domestic product - for a third year running this year.
But the euro zone's two biggest economies left the pact in tatters in November 2003 by persuading their EU partners to put the threat of financial punishment against them on hold.
In a ruling in July, the European Court of Justice said that EU countries had no right to put the pact 'in abeyance', confirming the European Commission's right to launch 'excessive deficit procedures' in the first place.
In its statement, the EU Commission said the timelag created by the wait for the court judgement meant that 2005 should be viewed as the correct target for France and Germany to get their deficits under the 3% limit.
