By Elinor Blair - 19th January 2005
EU finance ministers have been quick to reassert their authority over control of the EU Stability and Growth Pact.
The group strongly rejected proposals put forward earlier in the week by German chancellor Gerhard Schroeder suggesting a weakening of the fiscal rules underpinning the euro.
The German leader proposed that member statess should be allowed to run deficits above the stability pact’s strict three per cent of GDP limit.
Chair of the talks, Luxembourg Prime Minister Jean-Claude Juncker pointed out during talks on Tuesday that Schroeder, “is not in charge of the European economy.”
He also confirmed that finance ministers were moving closer towards a compromise on stability pact reform.
“We are progressing and positions are moving together. Extreme positions have been abandoned,” he confirmed.
Ministers also insisted that the European Commission retains its key role in enforcing the rules.
The talks revealed that whilst central parts of the pact will remain intact, there is still controversy on some points.
FT Europe reports that consensus has been found in so far as the three per cent deficit limit should be enforced, but that the rule that transgressors have only one year to correct the problem should be dropped.
It also notes that countries in economic slowdown, or with stable long-term finances should be allowed more time to correct excessive deficit.
Exactly when the excessive deficit procedure should be applied still remains a contentious issue amongst ministers.
Later this week, the Luxembourg leader and chair of ecofin will meet with the German chancellor where they will discuss reform of the pact.
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