European Union president Luxembourg expects to broker a deal next week on making the bloc's budget deficit rules more flexible, an official said today.
Luxembourg, which presides over the EU in the first half of 2005, will propose a draft of a final compromise during the weekend, which will be discussed by euro zone finance ministers on Monday and by all 25 EU ministers on Tuesday.
"The presidency's intention is to come as close as possible to an agreement," the Luxembourg official told reporters.
Luxembourg plans to finalise an agreement on reforming the EU's Stability and Growth Pact, which sets fiscal constraints on member states to underpin the euro, at an EU summit on March 23rd.
France and Germany, which have repeatedly breached the budget deficit ceiling, are spearheading efforts to relax the pact, saying the reformed rules would be more easily obeyed while growth would be boosted thanks to more investment.
The official declined to say if Luxembourg would stage another meeting of finance ministers ahead of the summit if the meeting next week brings no deal on the pact, which caps the budget deficit at 3 per cent of gross domestic product.
EU governments agree this limit should be kept, but some would like to extend the list of "exceptional circumstances", in which slow-growing countries may be allowed to run deficits higher than 3 per cent.
Diplomats say the EU has buried proposals to exclude from the pact's definition of budget deficits spending on research, infrastructure, pension reform, the cost of German reunification and on net contributions to the EU budget.
But there is a growing agreement on a possibility to suspend EU disciplinary action against a country that breaches the budget deficit ceiling due costs of some structural reforms, such as pension system overhauls.