Friday

2nd Dec 2022

EU 15 argue over stability pact flexibility

  • War with Iraq is not an excuse for loosening the terms of the Stability Pact. (Photo: EUobserver)

Germany, Britain and France want to make the controversial growth and stability pact rules more flexible, but this plan is facing strong resistance as almost half of the EU member states have expressed their doubts about such reform, reports the Financial Times.

The Commission has proposed a plan, under which countries with sound economies would be given rewards, while those with high debt and persistent deficits would face no mercy.

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Last year in October Romano Prodi, European Commission president, sparked the debate over the rules governing the euro by calling the Pact "stupid", because it was too rigid.

Reform of the Pact is supported by the three biggest EU economies, Germany, Britain and France, which all have been struggling to meet the targets set by pact.

Italy, Spain, Finland, Belgium, Denmark, Greece and Netherlands have already expressed their concerns over the plan. According to the Financial Times, the Commission's proposal says that states with low levels of debt and without big pensions liabilities should be allowed "slight deviations."

"We are confident that we have good arguments and that we can convince member states of the rationale of our proposals," said a spokesman for Pedro Solbes, EU monetary affairs commissioner, reports the FT.

Meanwhile, Le Monde reports that war in Iraq would be no excuse for member states not abiding by the euro rules. In a working document circulated to the 12 eurozone finance ministers, writes the paper, the Commission underlined that the cost of a possible war with Iraq should not serve as a pretext to ingore the Stability Pact.

Prodi calls stability pact 'stupid'

Commission spokesman Jonathan Faull had to carry out a damage limitation exercise after an interview by Commission president Romano Prodi with Le Monde. Mr Prodi's unguarded comments on the growth and stability pact were published in the Thursday edition of the French paper.

Budget deficit over limit admits French government

The French government admitted yesterday for the first time that its budget deficit would exceed three per cent of the country's gross domestic product (GDP), breaching the limit set by the European Union's stability and growth pact. According to the Financial Times, French prime minister Jean-Pierre Raffarin told business leaders that it was "probable France's budget deficit exceeded 3 per cent as early as 2002".

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