Both France and Italy are still grappling with budget deficits. For next year neither country has presented an out-and-out austerity budget. On the expenditure side France is putting the emphasis on the fight against unemployment, Italy is focusing on corporate sector competitiveness. While new borrowing in Italy looks set to climb towards 4.5 % of GDP in 2006, the 3 % mark is closer within reach for France but is still unlikely to be met. Conflicts over the stability and growth pact look inevitable.
