European governments are talking of delaying a self-imposed deadline to balance their budgets but have yet to take a common stand on the need for more budget flexibility to revive growth.
Italian Prime Minister Mr Silvio Berlusconi appeared to let the cat out of the bag when he said that he and other European conservatives were considering calling for the European Union to delay its 2004 balanced budget deadline.
But Luxembourg Prime Minister Mr Jean-Claude Juncker said yesterday there had been no unity on the issue at a meeting on the island of Sardinia, which was also attended by Spanish Prime Minister Mr Jose Maria Aznar and France's Mr Jean Pierre Raffarin.
Mr Juncker said the balanced budget deadline must be observed and that the Stability and Growth Pact, whose budget rules underpin the euro, must be respected.
"I do not remember that any of the prime ministers took such a decision as Mr Berlusconi appears to have spoken about," Mr Juncker said. "I think that the schedule that we approved must be adhered to."
Speaking to reporters after the meeting of EU conservative leaders, Mr Berlusconi said: "At most we are thinking about the possibility of deferring the balanced budget goal, but we decided to put off the discussion until after the German election (on September 22nd).
"We are all agreed, however, in our respect for the Stability Pact." The European Commission, which is sending senior officials to Italy this week to discuss the country's economic outlook and policies, declined to comment on Mr Berlusconi's remarks.
However, European Commission President Mr Romano Prodi said Germany, France, Italy and Portugal still had to make efforts to contain their budget deficits.
"Today budget deficits are rising again as a result of economic slowdown, but in a historical perspective, deficits remain low and several economies are actually comfortably into surplus," MR Prodi said in a speech in Lisbon.
"No country has gone back, as predicted by some critics, to the fiscal profligacy of the past... A specific effort is, of course, now required in Germany, France, Italy and Portugal."
Despite Mr Juncker's comments, Rome could find governments of other political persuasions willing to join in talks on delaying a balanced budget deadline that was agreed earlier this year, before the Commission downgraded euro-zone growth forecasts.
An aide to Belgian Finance Minister Mr Didier Reynders, a liberal, said a worsening economic climate may warrant a discussion of the deadline by which budgets must be balanced.
"Belgium wants the Stability and Growth Pact to be respected but the balanced budget goal must take into account the cyclical position of the budgets. So if the economic situation is worsening, the discussion will be open," the aide, said.
"We are pragmatic and if economies are slowing down then it is best not to push the balanced budget deadline issue too far.
"If the economic cycle is not improving, a delay in balancing budgets is unavoidable." - (Reuters)
