Brussels calls for stability pact reform

3rd September 2004, Comments 0 comments

3 September 2004 , BRUSSELS - The European Commission on Friday gave the green light to reforming the eurozone stability pact, allowing governments more leeway in applying the currency bloc strict budgetary rules. The proposals presented by the blocs monetary affairs chief Joaquin Almunia will allow eurozone governments to overshoot the pacts strict budgetary deficit threshold of three percent of Gross Domestic Product (GDP) in times of slow growth. No such breach is allowed at the moment unless countries

3 September 2004

BRUSSELS - The European Commission on Friday gave the green light to reforming the eurozone stability pact, allowing governments more leeway in applying the currency bloc strict budgetary rules.

The proposals presented by the blocs monetary affairs chief Joaquin Almunia will allow eurozone governments to overshoot the pacts strict budgetary deficit threshold of three percent of Gross Domestic Product (GDP) in times of slow growth.

No such breach is allowed at the moment unless countries can show that they face "exceptional circumstances," defined as a prolonged recession.

Governments will be given more time to meet eurozone fiscal targets. The proposals also place more emphasis on government debt levels than is the case at present.

"It is my firm belief that these proposals will provide for a stronger and more credible pact," said European Commission President Romano Prodi.

"Our proposals introduce more economic rationale in the implementation of the stability pact while strengthening surveillance and enforcement," added Almunia.

A statement by the Commission admitted that the identification of an "excessive budgetary deficit" and recommendations and deadlines to correct it "may benefit from taking better into account the budgetary impact of periods of exceptionally weak economic growth."

"Budgetary surveillance should ensure the achievement of surpluses in good times to prepare for the ageing of the population, to create sufficient room for dealing with economic slowdowns and to ensure an adequate policy mix over the cycle," the Commission said.

EU finance ministers will discuss the proposals at their informal meeting in the Netherlands next Friday and Saturday, although a decision is not expected until next year.

A statement by the current Netherlands presidency of the EU said the Commission proposals were "a good basis" for future discussion of the pact.

The Commission proposals are expected to ease tensions between Brussels and eurozone heavyweights Germany and France which have repeatedly breached the pact's 3 percent limit.

DPA

Subject: German news
 

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