EU finance ministers meeting in Athens have said the war in Iraq has yet to have an impact on the European economy that would require political action, writes Denis Staunton in Athens.
The Economic Affairs Commissioner, Mr Pedro Solbes, made clear that the war should not be used as an excuse to break the rules of the Stability and Growth Pact.
France, Germany and Portugal have already breached the pact's 3 per cent limit on budget deficits but Mr Solbes told them that they could not seek refuge in the pact's "exceptional circumstances" clause because of the war.
"The exceptional circumstances only apply to the costs of war in those countries that are taking part in the war," he said.
Britain and Denmark are the only two EU member-states to participate in the military campaign in the Gulf.
Luxembourg's prime minister, Mr Jean-Claude Juncker, who is also his country's finance minister, said a number of small countries were suspicious of attempts by bigger member-states to introduce a more flexible interpretation of the pact.
"Those countries that are promoting it now are the same ones that were calling for it a year ago, before the Iraq war. I am somewhat suspicious," he said.
The Minister for Finance, Mr McCreevy, was more relaxed about the growing number of countries breaching the euro-zone's budget rules. He pointed out that the rule-breaking had not had a negative impact on the euro's exchange rate.
Germany's finance minister, Mr Hans Eichel, said that, contrary to fears that oil prices would rise sharply once war broke out, they had actually fallen. But he added that, if the war was prolonged and the economic situation deteriorated sharply, central banks could stabilise the financial markets by boosting liquidity and possibly by cutting interest rates.
The ECB president, Mr Wim Duisenberg, said interest rates were at the right level for the moment. "We are monitoring developments almost constantly," he said.
Mr Duisenberg echoed concerns expressed by Mr Solbes over the US current account and fiscal deficits. Mr Solbes said that the EU would raise the issue with the US at next week's G7 finance ministers' meeting in Washington.
Mr McCreevy distanced himself from the criticism of the US, however, pointing out that Europe's economic performance has not matched that of the US.
"Over the last decade, the US economy has grown enormously. The economies of some European countries have not grown so impressively. I would be trying to get my own house in order first before telling others how to decorate theirs," he said.
