Berlin, Paris cleared on budget rules

14th December 2004, Comments 0 comments

14 December 2004 , BRUSSELS - The European Commission on Tuesday suspended excessive budget deficit disciplinary action against France and Germany, ending a three-year financial battle with the two eurozone heavyweights. The Commission - which is eurozone watchdog as well as the executive arm of the European Union - said it was satisfied that Berlin and Paris were working to reduce their budget deficits below the eurozone stability pact ceiling of 3 percent of gross domestic product(GDP)in 2005. Paris and

14 December 2004

BRUSSELS - The European Commission on Tuesday suspended excessive budget deficit disciplinary action against France and Germany, ending a three-year financial battle with the two eurozone heavyweights.

The Commission - which is eurozone watchdog as well as the executive arm of the European Union - said it was satisfied that Berlin and Paris were working to reduce their budget deficits below the eurozone stability pact ceiling of 3 percent of gross domestic product(GDP)in 2005.

Paris and Berlin have breached the 3 percent rule for three years running, making them eligible for disciplinary action, including a possible multi-million euro fine.

But EU finance ministers agreed last November not to punish either country, prompting a furious Commission to take them to the European Court of Justice.

Backing the Commission, the Court said ministers were wrong in not taking action against the two deficit sinners.

However, the EU executive has since then recognised that the stability pact needs to be revamped and made more flexible. This, in turn, has led to an easing of tensions with Germany and France.

Officials say the Commission wants harmonious relations with EU governments to ensure the success of the stability pact reform discussions.

The eurozone landscape has also changed over the years, with a total of ten countries in the currency bloc currently over the 3 percent threshold.

The German government says it expects the national economy to grow by around 1.5 to 2 percent next year.  It argues that this will help reduce the budget deficit to 2.9 percent of GDP from an expected 3.75 percent gap this year.

France said its budget deficit would also drop to 2.9 percent of GDP next year, down from a 3.9 percent level forecast for this year.

DPA

Subject: German news

 

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