Germany and France will tonight join forces in a last-ditch legal attempt to save themselves from the full impact of the EU's budget rules.
Both countries want to stop the European Commission starting enforcement action against them under the EU's Stability and Growth Pact, a process that could eventually lead to fines.
The challenge has been driven by Mr Gerhard Schröder, the German chancellor, who fears a politically humiliating row with Brussels over his government's deficit - set to breach the pact's 3 per cent limit for the third year in a row in 2004.
Germany and France, which is also set to break the rules for a third year in succession, hope they can use the prolonged economic slowdown as an excuse for an indefinite delay in the Commission starting the countdown to sanctions.
Although few believe Germany will be fined, the prospect of Berlin taking instructions from Brussels, and being forced to make regular progress reports to the Commission, has proved too much for Mr Schröder.
German government lawyers claim it would be possible to strike a deal where Berlin and Paris agreed to take further measures if the Commission agreed not to make binding policy recommendations.
The legality of the move was being explored over the weekend ahead of a two-day meeting of EU finance ministers, beginning tonight in Brussels. European Commission officials say the German move, if successful, would inflict incalculable damage to the stability pact, but insist it would be illegal.
"We have probably never been in such a serious situation," admitted one senior EU official.
Germany and France have support from Italy, Portugal and Luxembourg for a flexible interpretation of the pact, but others are furious at their initiative.
"There will be a very heated meeting tonight," said one EU official preparing tonight's eurogroup meeting of 12 single currency finance ministers. "The Dutch and the Austrians are spitting blood."
Both the Netherlands and Austria believe France and Germany have already escaped lightly over repeated breaches of the stability pact's 3 per cent deficit limit.
The crisis over the Stability and Growth Pact is now reaching a head, following the European Commission's move last month to begin enforcement proceedings against France. Mr Pedro Solbes, EU monetary affairs commissioner, has recommended that France cut its structural deficit by 1 per cent next year - compared with the 0.7 per cent already planned.
He also gave France a further year, until 2005, to comply with the pact, a move widely seen as a generous interpretation of the rules.
But the Commission's recommendation has to be approved by EU finance ministers - a situation sometimes compared with allowing players to overturn a referee's decision.
