The European Commission will ask EU states today to move ahead with budget discipline action against Germany but faces a growing risk that Berlin may build a coalition to block any steps against itself and France.
The European Union executive refused comment on press reports that it will demand savings of 0.8 percentage point of gross domestic product in Germany's 2004 budget, but has said it will give Berlin an extra year, until 2005, to bring its deficit below the EU cap of three percent of gross domestic product.
The Commission has already proposed similar treatment for France. But Berlin is unhappy at closer policy scrutiny that would ensue, as well as at moving a step closer to fines, the ultimate sanction in the budget disciplinary process.
EU finance ministers want to tackle the French and German cases at the same time, on November 25th, and their deputies will therefore be battling to strike a last-minute deal before euro zone finance ministers' meet informally on November 24th.
"Germany and France could muster a blocking minority, which means they can reject the Commission proposals altogether," said one EU finance official on Monday.
"But the hope is it won't come to that as the intention of all member states is to find an agreement. The way out will be to find a solution somewhere between the Commission's recommendation and what Germany is saying."