The European Commission has taken the first step towards disciplining Germany for breaching the 3 per cent ceiling on budget deficits laid down in the Stability and Growth Pact.
And the Commission yesterday also asked EU finance ministers to issue an official warning to France that it is in danger of breaking the budget rules.
The Economic Affairs Commissioner, Mr Pedro Solbes , said it was essential for the stability of the euro that the pact's rules should be enforced. However he appeared to indicate in a newspaper interview that a softer line might be adopted in the case of the Republic.
"If a country like Ireland breaks the Stability Pact, then that does not matter that much. But if a country like Germany breaks it, that can have dire consequences, also for the euro," Mr Solbes was quoted as saying in an advance release of an interview in Thursday's Die Zeit.
Speaking at a news conference yesterday he said "If we're going to have a single currency, if we're going to abide by the system that we've adopted for ourselves, we must be consistent. In other words, the Council has to take consistent decisions. Otherwise we'll be shooting ourselves in the foot and this will have very damaging consequences for all".
The German government was quick to accept yesterday's censure, which could lead to heavy fines if Berlin fails to bring its budget under control. Mr Gerhard Schroeder's coalition of Social Democrats and Greens this week agreed a revised budget for 2003, which promises to bring the deficit below 3 per cent. But the Commission said there was not enough information to suggest for certain that the planned measures would be sufficient.
Berlin says that Germany's 16 federal states are responsible for 55 per cent of the budget deficit and Mr Schroeder wants the states to bear their fair share of the burden.Germany could avoid fines if the excessive deficit was caused by exceptional, external events, but the Commission said yesterday that this was not the case.
"While budgetary developments have been negatively affected by weak economic activity and, to a minor extent, by flood damage, the excessive deficit does not result, in the sense of the Treaty, from an unusual event outside the control of Germany, nor did it result from a severe economic downturn," it said.
Portugal this year became the first euro-zone member-state to be censured under the Stability and Growth Pact.After Germany, France looks almost certain to be the next.
The French finance minister, Mr Francis Mer, said yesterday that the Stability and Growth Pact should be "fine-tuned" so that the debt levels of the euro-zone economies should be taken into account alongside budget deficits.
