BRUSSELS -- Germany and France said on Monday European budget rules should take more account of jobs, inflation, and debt, rather than focusing on deficits.

But they look unlikely to escape censure for their own budget shortcomings.

The finance ministers of Germany and France came up with the idea at a bilateral meeting in Berlin, the second time in almost as many weeks that the euro zone's two biggest economies have come up with a common proposal hours before meeting EU partners.

However, they joined their peers in Brussels only to find the spotlight still firmly on the risk they may breach compulsory European Union deficit limits -- just as Portugal did in 2001 and for which it now faces discipline action.

European Monetary Affairs Commissioner Pedro Solbes said there was nothing new to the Franco-German proposal and that the two countries risked official action over their deficits, once he had finalized official deficit forecasts, due November 13.

For France that would mean an official warning that its deficit is rising too close to EU limits and for Germany, the start of a budget discipline action, according to Austria's Karl-Heinz Grasser.

"I think the direction is very clearly going toward ... an early warning for France, an excessive deficit procedure for Germany," Grasser said after euro zone ministers had met.

EU diplomats told Reuters the commission expects Germany to breach the EU's deficit cap of three percent of gross domestic product (GDP) this year and estimates the French deficit will rise from 2.6 percent of GDP this year to 2.8 percent in 2003.

??????Get Deficits Down First????? The Franco-German proposal got even shorter shrift from some euro zone countries.

"I think that countries which are breaching limits (of the stability and growth pact) should not propose a softening of the pact," Dutch Finance Minister Hans Hoogervorst told reporters.

Even those who were keeping a more open mind said the priority was for Berlin and France to wipe out their deficits.

"It is very strange to make some proposals before ... a clear statement about a good evolution (on budgets) for next year," Belgian Finance Minister Didier Reynders said.

"We must be clear that we are going toward ...

balanced budgets. If it is not the case, there is no sense in discussing inflation," he added.

But German Finance Minister Hans Eichel and his French counterpart, Francis Mer, said their proposal did not intend to alter the spirit of a pact designed to safeguard monetary union.

"We're committed to the pact, to its instruments and above all to its spirit," Eichel said in Berlin. Mer echoed him after arriving in Brussels: "For the sake of better coordination of economic policy I indicated a number of elements to take into account for a good policy mix, but it does not change in any way the growth and stability pact."

They may yet win support for their proposal.

Solbes said inflation and employment were "not so relevant" for the pact but that the commission would be willing to pay greater attention to such issues if EU finance ministers thought it was warranted.

Also, European Commission President Romano Prodi, who has criticized the stability pact for being too rigid, said the EU executive would be doing the budget rules and monetary union a favor by applying the pact intelligently.