EU finance ministers are likely to discuss reforming the strict budget rules that underpin the euro this weekend, the Minister for Finance, Mr McCreevy, told an Oireachtas committee yesterday.
Addressing the Oireachtas Joint Committee on European Affairs, Mr McCreevy defended EU finance ministers' recent decision not to sanction Germany and France for allowing their budget deficits to overshoot the limit laid down in the EU's Stability and Growth Pact.
The pact, designed to ensure financial discipline across the euro zone, limits member-states' budget deficit to 3 per cent of gross domestic product (GDP). Economic difficulties forced the zone's two largest economies to break this barrier.
Mr McCreevy told the committee that the ministers' decision had raised the question of whether the pact needed to be "further developed to take account of more complex circumstances and variables" that affect different member-states. He said this issue could be discussed when EU finance ministers meet in Brussels on the periphery of the EU heads of government summit.
He stressed that, as incoming President of the European Council of Finance Ministers (Ecofin), he wanted to reiterate his commitment to the pact as a means of promoting financial stability in Europe.
In the course of the hearing, he indicated that there were differences over economic policy between Ecofin and the EU Commission.
"The Commission wants a strict rules-based system with no political interference," he said. "That would be grand if I believed that economics was an exact science, but it's not."
The Minister told the committee that the Commission wanted Ecofin to begin the process of formally sanctioning France and Germany, but the majority of members-states opposed this approach. Instead, the Council secured a commitment from both to bring their deficits in line with the pact by 2005. He claimed that this was ultimately the outcome the Commission wanted.
Mr McCreevy also told the meeting that the Commission was looking at changing the rules governing the way member-states accounted for public private partnership (PPP) infrastructure projects. He said the current approach was unclear and failed to take into account that states repaid loans for these projects over long periods, often 20 years or more.
He told the committee that the Commission's statistics body, Eurostat, had set up a working group to look at the issue. Mr McCreevy said he understood that it would come up with proposals that would clarify how PPP-style projects should be treated in national accounts.
The Minister said one of the key problems in this area was the fact that Eurostat often advised member-states after they had raised funds for a specific project.
