The pact requires the 12 countries that have adopted the euro as their currency to keep their budget deficits - tax revenue minus public spending - below three percent of their Gross Domestic Product (GDP) every year.

But Mr Lamy believes this requirement is "too simplistic to run an economy". He says the EU needs a more "intelligent" pact, which requires Member States to balance their budgets over the medium term - a similar system to that used in Britain.

By calling for reform of the pact, Mr Lamy is siding with his compatriot French President Jacques Chirac, who has also recently called for a relaxation of the rules.

This is unsurprising, since France is set to break the pact for the third year running in 2004 and could face massive fines as a result. Germany is in a similar position.

However, smaller Member States - who tend to have lower deficits - have strongly argued for keeping the pact as it is, saying that the credibility of the rules governing the single currency is at risk if the larger countries do not stick to them. The European Central Bank (ECB) also wants to keep the current framework.

The Trade Commissioner's intervention is likely to stir up the argument once more.