Germany could face fines from Brussels in 2005 unless it brings its budget deficit under control, Mr Pedro Solbes, European Union monetary affairs commissioner, says in an interview published today.
Usually Mr Solbes refuses to be drawn into discussing the European Commission's "nuclear option" for forcing countries to comply with the EU's stability and growth pact.
But in an interview with the German magazine Capital he says fines could be imposed if Berlin exceeds the pact's deficit ceiling - 3 per cent of gross domestic product - for a third successive year in 2004.
"If the deficit is above 3 per cent in 2004 as well, a penalty could be imposed in January 2005," he is reported as saying.
Under the pact, the Commission can propose fines of 0.5 per cent of GDP, which in Germany's case could amount to over €10 billion. The penalty would have to be endorsed by other EU finance ministers.
The same procedure would be expected to apply to France if it exceeded the deficit limit in 2004. Like Germany, it broke the pact in 2002 and is certain to do so again in 2003.
A spokesman for Mr Solbes said he could not confirm the quotation, but pointed out that the earliest the Commission could take action would be in March 2005, when the official deficit data are published.
Before sanctions were imposed, Germany or France would be issued with a final list of proposed measures to bring their deficits within the pact.
The Commission and other EU member-states will be reluctant to confront the two biggest countries in the euro zone with punitive sanctions if they are doing their best to control their deficits.
However, many countries, including Germany itself, are keen to maintain the pact's credibility to deter future spenders.
The crisis in the euro zone, beset by rising deficits and virtually non-existent growth, has prompted renewed calls for the single currency area to have a greater say over its own economic decisions.
Currently, most economic matters are dealt with by all EU finance ministers in the Ecofin council - including those from Britain, Sweden and Denmark, which still use national currencies. - (Financial Times Service)
