Europe’s finance ministers have agreed a compromise rethink of the EU fiscal rules that underpin the European single currency.
Ministers met on Sunday ahead of a Tuesday summit of EU leaders focused on economic growth and reform of the Stability and Growth Pact.
The deal “does not change the fundamental rules” of the Pact, said EU presidency holder and Luxembourg’s Prime Minister Jean-Claude Juncker.
But many European newspapers report that the fiscal rules aimed at underpinning the euro’s stability have been loosened.
Countries in breach of an annual public debt ceiling of three per cent of GDP will potentially have five years to correct the budget deficit rather than one.
Germany is said to be satisfied with a move to allow EU member states to breach the pact’s annual three per cent of GDP ceiling on public debt if extra costs for “the reunification of Europe” are a factor.
Berlin spends four per cent of GDP on transfers to the former Stalinist East Germany. Both Germany and France have consistently breached the fiscal rule of three per cent leading moves to a looser stability pact.
New EU member states also secured a key agreement on pension reforms which will be considered under excessive deficit procedure.
Spending on R&D and “achieving European policy goals” can also be offset under the rethink.
The “list” of “relevant factors” that should be taken into account for budget overruns was dropped.
EU member states will be able to determine their own relevant factors, which will be assessed by the European Commission and Europe’s finance ministers.
Reacting to the deal, the German Finance Minister Han Eichel said a “good political agreement” had been reached.
“You are seeing before you a very happy German finance minister,” he said.
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