French finances in great difficulty: Trichet

PARIS (Reuters) - European Central Bank President Jean-Claude Trichet said on Sunday that French public finances were in trouble and that the country must respect its European commitments.

Tension is high between the ECB and France's government, with President Nicolas Sarkozy repeatedly blaming ECB policies for sluggish domestic economic growth and the euro's strength.

France has also come under pressure from its euro zone peers to do more to cut its budget deficit.

"French public finances are in very great difficulty and that's a fact, and it is a fact that one is right to underline," he said in a live interview on Europe 1 radio and TV5 television.

He cited various European Commission statistics that cast France in a poor light compared with its European neighbors, highlighting the cost of tax cuts and other planned reforms by Sarkozy that are aimed at boosting growth and employment.

"In 2007, according to the Commission's statistics, France will be the country that spends the most in public spending as a proportion of gross domestic product, not only within the euro zone, but in the 27-member European Union," he said.

"It is obviously a very heavy point for the economy."

Eight years ago, several countries, such as Scandinavian states, were well ahead of France in terms of public spending, Trichet said.

"Careful management of public finances is very important and obviously, in the eyes of the Commission as well as the European Central Bank, France must respect its commitments," he added.

Earlier this month euro zone finance ministers told their French counterpart Christine Lagarde at a meeting in Portugal that Paris had to step up its deficit reduction measures.

The French government says it will try to balance its budget by 2010, as its euro zone peers say it should, if the economy allows and will definitely achieve that goal by 2012.

"When we look at the figures, we are worried to see that the evolution of French public finances has, on average, been significantly worse than the evolution of other partners," Trichet said, calling for a renewed effort.

Trichet later said he was not getting involved in French political debate and that he was talking about the management of French public finances over the past three decades.

"Of course it can be corrected ... France could correct it," he said, adding that it would not have to involve "blood and tears."