By Henrietta Billings - 14th December 2004
Brussels has announced that it will drop further action against Germany and France for breaching euro fiscal rules.
The European Commission decided at its weekly roundtable that an assessment of Paris and Berlin's finances revealed that they are on track to bring their budget deficits to or below the three per cent limit by 2005.
"Given the action taken by France and Germany it would appear that no further steps are required at this point," said EU finance chief Joaquin Almunia on Tuesday.
France and Germany have broken EU rules since 2002 by running deficits above 3 per cent of gross domestic product, triggering a row between Commission and member states over breaches of the rules which underpin the euro.
Last year Brussels pushed for 'excessive deficit' measures which could have led to heavy fines levied on France and Germany for failing to keep budgets out of the red.
But in November 2003 governments rejected the commission proposals, instead voting, within the eurogroup of countries belonging to the single currency, for a softly, softly approach committing Paris and Berlin to tightening their purse strings over the next two years.
Fearing the decision would undermine faith in Europe's ability to control finances and guarantee the euro's stability the commission launched a court case which culminated in July when judges in the European Court of Justice sided with Brussels.
Tuesday's decision is based on the Commission's assessment that Germany's deficit is projected to fall from 3.9 per cent to 2.9 per cent in 2005.
France's deficit is projected to fall to 3 per cent of GDP in 2005 from 3.7 per cent in 2004.
Have your say...
Please enter your comments below.