The debate over whether EU budget rules should be eased in view of the euro zone's faltering economy hotted up yesterday, but an EU diplomat said finance ministers would not discuss the issue at this weekend's meeting of finance ministers.
The diplomat said euro-zone ministers would talk about national budgets but Germany, whose deficit risks exceeding a European Union limit, will avoid an official rebuke.
Yesterday, a European central banker and two euro-zone countries voiced opposition to loosening the Stability and Growth Pact, which protects the euro from budget laxness.
But a senior German economist called for reform of the rules and former finance minister Mr Ruairi Quinn said if changes were to come, they should be made openly, not through a political fudge.
EU finance ministers are holding a two-day informal gathering in Copenhagen tomorrow and Saturday, with the euro-zone ministers meeting taking place late on Friday.
"My expectation is that the debate will focus on the discussion of the economic situation in preparing for the upcoming G7 and the other topic is budgetary development inside the (monetary) union," the EU diplomat told a news briefing. "We are heading for a situation with lower growth and greater uncertainty," he added.
But the diplomat played down the chances of Germany, struggling to meet EU budgetary deficit targets, being singled out for criticism. "If anything has to be said (to the German government about its deficit), it is for the Commission to take the initiative and I don't see that happening in Copenhagen." He said ministers were unlikely to discuss the future of the Stability Pact, despite calls for it to be made more flexible at a time when the region's economies are struggling to grow again.
Italy has called for such changes in the past, but others are now also making a case for revisions to the pact. Mr Klaus Zimmermann, head of the Berlin-based DIW economic research institute, said the pact should be made more flexible and distinguish between deficit violations which came despite good policies and those caused by bad ones."The Stability Pact is not being questioned in principle but it is necessary to reform it and this is something that has been under discussion on a European level for a long time," he said.
Labour leader Mr Ruairi Quinn, who was chairman of European Union finance ministers when the Pact was hammered out, said it would be better for the budget rules to be changed openly rather than fudged under political pressure. "It would be better for the entire financial architecture if the European Central Bank and the Ecofin council (of EU finance ministers) would formally review the Stability Pact," Mr Quinn said.
