Mr Joaquin Almunia, the European Union's Monetary Affairs Commissioner, will this week seek to wean Europe off its obsession with the minutiae of budget deficits, shifting the focus to wider economic reform.
Mr Almunia wants to make Europe's budgetary rules more flexible, in an attempt to defuse a situation where a country whose deficit edges over 3 per cent of GDP faces the threat of heavy sanctions.
He believes the EU's economic debate is too concerned with government deficits and should focus more on putting pressure on member-states to push through policies to boost growth.
His economic governance paper, to be approved by the European Commission on Friday, seeks to end three years of rows over the operation of the EU's Stability and Growth Pact.
The pact, conceived in the late 1990s to impose budgetary discipline in the new single currency area, has fallen into disrepute, with France and Germany repeatedly breaking its rules. The Commission's attempts to impose the pact ended in acrimony last November, as the euro zone's two biggest economies orchestrated the suspension of its rules.
Mr Almunia, who continues in his post under Mr José Manuel Barroso's new European Commission, wants to take the conflict out of the stability pact.
"We want to lead the debate on reform," said one of Mr Almunia's allies.
"We want the debate to be as open and transparent as possible."
Countries, such as France and Germany, that run deficits of more than 3 per cent of GDP would be given longer to sort out their problems if they were suffering sustained low growth, EU officials said.
Mr Almunia is also expected to redefine the "exceptional circumstances" under which a breach of the pact is permitted, softening the current definition of negative growth of 2 per cent of GDP.
The commission will, on Friday, also look more broadly at ways of improving the co-ordination of growth and budget policies, for example, by concentrating such co-ordination in the first half of the calendar year.
EU agreements on the broad outlines of economic policy would then act as the framework for national parliamentary debates on budgets, which normally take place in autumn.
"EU governance is about several things. It is about co-ordination, not just of budgetary policy, but also of the broad economic policy guidelines, and the calendar of such co-ordination," according to one EU source.
The commission has previously said it also wants to improve surveillance of one-off budget measures, and would prefer a state's budget adjustments to be measured on the basis of growth forecasts made by a third party rather than the country itself.
The Commission's proposals come ahead of a meeting of EU finance ministers in the Dutch resort of Scheveningen next Saturday, where reforms to the pact will be discussed.
A final package of reforms to Europe's economic governance framework will be agreed during the Luxembourg EU presidency in the first half of 2005. - (Financial Times Service, Reuters)
