'Rainy day fund' in pipeline - McCreevy

Ireland's finance minister Charlie McCreevy has confirmed European Commission plans for euro governments to set aside a "rainy day fund" to stabilise their economies.

The move will be part of a commission proposal on economic governance due to be adopted in a couple of weeks.

It is expected to make more flexible the EU Stability and Growth pact underpinning the euro, which obliges governments to keep public deficit under three per cent of GDP.

McCreevy told MEPs on Monday, "It is quite likely (the proposal) will recognise that in times of economic success you put money aside in a rainy day fund for when things are not going so well."

But he stressed that most finance ministers want to wait before making any adjustments to the pact.

Relations between the commission and member states were damaged by the ministers' decision in November to suspend the pact.

Their decision retreated from imposing sanctions on France and Germany for their excessive deficits under the euro rules.

Asked how long ministers might wait before considering changes, the Irish minister replied "the best part of a year", and said he expects discussions to begin in the second half of 2004.

He also underlined the fact that unanimity is required for any modifications. "To get agreement in these areas is not very easy", he said.

But McCreevy denied that faith in the euro pact has been irreparably damaged and insisted member states still have to abide by its rules.

"If you don't have rules you allow member states to go off and do something that would damage everyone," he insisted.

"The pact is not dead. If we didn't have the pact do you think France, Germany and Portugal would have taken the measures they have to stick close to three per cent (on their deficits)?"

The minister said the UK would not be treated in the same way as the euro countries if it exceeds the three per cent deficit limit imposed on the eurozone.

"It's not in the eurozone", he said, "so it's not affecting (exchange) rates."

On EU budget plans for 2007 to 2013 due to be finalised in 2005, McCreevy said talks will be "lengthy and difficult".

But Ireland's position, he said, supported a budget of at least as much as is available at the moment.

"One of the reasons for the positive growth in Ireland is having been a member of the EU," he told journalists. "It would be reasonable to allow others to do the same."

Ireland is a net beneficiary of the EU budget, meaning it receives more money from the pot than it puts in.

Rich net contributors like the UK, France and Germany want to reduce the maximum ceiling of any member state's contribution from 1.24 per cent of GNI to just one per cent.

Lastly, McCreevy said the new member of the European Central Bank board of governors could be decided next month.

"We might get an agreement at the next finance ministers' meeting in February," he told MEPs.

Current board member Eugenio Domingo Solans is due to step down from the board at the end of May after a five-year term.

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