European Union finance ministers have backed more stern sanctions against countries which repeatedly flout the union’s fiscal rules.
The ministers, including Minister for Finance Brian Lenihan, met in Brussels tonight to discuss changes to the way the 27-member union manages public finances and its coordination of economic policy as investors flee the euro, pushing the common currency down 6 per cent this month.
Mr Lenihan said he was under no pressure from the EU Commission to take new measures this year to ease Ireland's budget deficit.
Mr Lenihan told reporters in Brussels that the claims from EU economics commissioner Olli Rehn that Ireland will be “in focus” as the Commission reviews European economies next month, had not been communicated to him or the Government.
"Let's have a little bit less of the Skibereen Eagle here. He's the commissioner who is responsible for 27
member states," Mr Lenihan said.
"He cannot say to one member state on the margins of a press conference that 'oh well of course Ireland is so good we're not even looking at it'. Of course he has to look at every member state. There's been no particular concern conveyed to Ireland about the envisaged consolidation."
After the German Bundestag approved Berlin's participation in the €750 billion EU/IMF safety net for distressed euro members, European Central Bank (ECB) chief Jean Claude Trichet sought to calm anxious markets by saying the euro was not in danger.
Austrian finance minister Joseph Proell told reporters: "We must do everything we can so that countries that are lax with their budgets can be rapped on the knuckles".
Germany, whose Chancellor Angela Merkel has led the calls for tougher fiscal action, agreed yesterday to work together with France to solve Europe's debt crisis, patching up a public rift between the euro zone's top two economies that had rattled markets around the world.
A paper prepared for meeting by Berlin showed Germany wanted tight national compliance with budget rules, as it tries to rally the rest of the euro zone and EU behind its vision and stop differences undermining the union's unity.
"We need to have stronger sanctions and better national frameworks; the culture of stability needs to be reinforced. I see strong points in the German proposal," Swedish finance minister Anders Borg told reporters.
EU governments are trying to regain investors' confidence after months of turmoil that have pushed many euro zone member states' borrowing costs sky high, led to a €110 billion bailout of Greece and the setting up a €750 billion safety net to try to prevent the contagion spreading.
The debt crisis has provoked huge instability in the currency and led to demands for EU states to work much harder on coordinating their economic policies and bring their finances into check.
EU finance ministers, chaired by EU President Herman Van Rompuy will meet regularly over the next six months.
Their job is to look at how to tighten to the EU's budget rules, known as the stability and growth pact, to ensure that future crises can be prevented.
"Urgent action is needed to correct weaknesses in procedures and institutions, to reform the stability and growth pact and to develop new policy tools," Germany said in a paper prepared for the meeting of EU finance ministers.