Eichel: Germany not threatenedwith fines by budget pact ruling

13th July 2004, Comments 0 comments

13 July 2004 , BERLIN - German Finance Minister Hans Eichel on Tuesday welcomed a European Court of Justice ruling overturning a decision last year to exempt Germany and France from fines for overshooting eurozone budget deficit limits. "We are no closer to sanctions than we were before," said Eichel in an interview with Deutsche Presse-Agentur dpa. Eichel said he welcomed the court's decision because it made clear that the European Commission - which had sought sanctions but was rebuffed by European Union

13 July 2004

BERLIN - German Finance Minister Hans Eichel on Tuesday welcomed a European Court of Justice ruling overturning a decision last year to exempt Germany and France from fines for overshooting eurozone budget deficit limits.

"We are no closer to sanctions than we were before," said Eichel in an interview with Deutsche Presse-Agentur dpa.

Eichel said he welcomed the court's decision because it made clear that the European Commission - which had sought sanctions but was rebuffed by European Union (EU) finance ministers - would now have to come up with a new proposal.

"This is a very wise ruling," said Eichel.

Germany is set to overshoot the 3 percent of GDP budget deficit limit set under the eurozone's Stability and Growth Pact for a third year in a row in 2004.

Eichel said Germany had done everything requested by the eurozone to tame its budget deficit last year but that projected growth of 1.5 percent failed to materialise. Instead, Germany's economy contracted by 0.1 percent in 2003.

Berlin, he insisted, had been told it was not expected to take further measures if predicted growth failed to take place.

"Thus, I cannot accept sanctions on that basis," said Eichel.

In theory countries which overshoot the 3 percent limit can face massive fines of up to 0.5 percent of their total GDP.

Eichel vowed that Germany would do everything possible to meet the 3 percent limit in 2005 and vowed extra measures, which he declined to specify, to hold down the deficit.

In Luxembourg, the European Court of Justice earlier Tuesday overturned waivers granted by EU finance ministers on penalty procedures against France and Germany for violating the deficit limit.

The European Commission - acting as eurozone financial watchdog - had taken finance ministers to court after they ignored its calls for disciplinary measures against Berlin and Paris.

Clearly vindicated by the ruling, the Commission announced in Brussels that its recommendations for action against Germany and France "remain the only legal text valid."

The court decision "confirms the essential role of the stability and growth pact," Commission President Romano Prodi told reporters.

However the Commission said it would cooperate with finance ministers to ensure a "satisfactory resolution" of the two economic giants' budgetary problems. "A rules-based system is the best guarantee for commitments to be enforced and for all member states to be treated equally," the Commission said.

A brief separate statement by EU finance ministers issued by the current Dutch presidency of the 25 nation bloc said the Luxembourg court had helped clarify interpretation of eurozone financial rules and the "respective roles of the Commission and the Council."

Both the Commission and finance ministers would cooperate in "closely examining" the implications of the ruling, the statement said.

EU finance ministers took the controversial step last November of overruling Commission calls for disciplinary action against Paris and Berlin.

Smaller eurozone nations - Austria, the Netherlands, Finland and Spain - voted against the council decision, arguing that the stability pact must apply equally to all members of the currency zone.

Twelve EU countries share the euro currency and are subject to the stability pact which sets a limit on public-sector deficits equivalent to 3 percent of GDP.

The Dutch presidency noted in its statement that both Germany and France had vowed to slash their budget deficit. Both countries "have taken steps to implement those commitments," the statement underlined.

In Paris, French Finance Minister Nicolas Sarkozy said the decision would aid his battle to control the deficit.

"This decision comforts me in my commitment to control public spending in order to reduce (budget) deficits, in conformity with France's European commitments," Sarkozy said.

The ruling "is a reminder that joint European regulations must be scrupulously respected", he said.

Prime Minister Jean-Pierre Raffarin had reacted to the decision by saying it would have no effect on his government's budget policies, "which aim to respond to European criteria through reforms, the resolute control of spending and policies for economic growth".

DPA

Subject: German news

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