European Union governments should draw up three-year economic reform programmes and report on progress each year, the European Commission told EU finance ministers yesterday.

The commission would analyse the national reports each year to ensure that they were effectively promoting economic growth and employment and propose changes if necessary.

The economic and monetary affairs commissioner, Joaquin Almunia, told the finance ministers at a meeting in Luxembourg that the new system of integrated guidelines would replace the Broad Economic Policy guidelines, the EU's primary instrument for co-ordinating national economic policies.

The guidelines would encourage governments to target public spending towards activities that boost economic growth, to accelerate structural reforms and to attract more people into employment while increasing spending on education and training.

The finance ministers agreed Greece was doing enough to bring its budget deficit under control and should escape sanctions under the stability pact.

Luxembourg's prime minister, Jean-Claude Juncker, who chaired yesterday's meeting, said, despite an expected 4.5 per cent deficit this year, Greece was on track to comply with the budget rules.

"The Greek government is in the process of taking very serious efforts to reduce the budget deficit. We judged that there are no new and supplementary measures necessary," he said.

Ireland opposed a commission proposal to use new taxes to increase the EU's overseas development aid to 0.7 per cent of GDP by 2015.

The development commissioner, Louis Michel, told the European Parliament yesterday that new taxes on arms sales, aviation fuel or airline tickets could help EU countries reach their development aid targets.

The Minister of State at the Department of Finance, Tom Parlon, said the best way to ensure that funding increase is for governments to contribute on behalf of their citizens and to encourage private donations through tax relief.

The commission wants to co-ordinate EU development aid in advance of a United Nations meeting in September that will review the millennium development goals agreed in 2000.

Few EU countries expect to reach the target of 0.7 per cent of GDP by 2010, as agreed five years ago, but the commission believes that the target can be achieved by 2015.