THE European Union's monetary committee made no progress yesterday on a budget agreement for countries joining the single currency.

EU monetary sources said the committee, comprised of national department of finance and central bank officials, will meet again next week to try to secure a final blueprint for a budget pact ahead of next month's summit of EU leaders in Dublin.

But sources said the most likely outcome would be a progress report with several important issues still outstanding.

"It remains to be seen what can be done, but I'm not that optimistic," said one source.

Tough German demands have so far blocked an accord on a pact that penalises governments running excessive deficits within a monetary union. It is considered by many to be an essential element of EMU.

Perhaps the toughest hurdle is agreement on a precise definition of a severe economic downturn which would let governments with deficits above 3 per cent of gross domestic product avoid sanctions.

Germany very much wants a quantitative definition of what constitutes so-called "temporary and exceptional" circumstances.