Stability pact reform meets with mixed reaction

21st March 2005, Comments 0 comments

21 March 2005, BERLIN - German Chancellor Gerhard Schroeder praised the weekend agreement by European Union finance ministers to reform the monetary stability pact, while the conservative opposition and a major economic think-tank criticised the agreement.

21 March 2005

BERLIN - German Chancellor Gerhard Schroeder praised the weekend agreement by European Union finance ministers to reform the monetary stability pact, while the conservative opposition and a major economic think-tank criticised the agreement.

Schroeder called the deal hammered out in marathon talks in Brussels ahead of this week's EU summit a "good result" and said the opposition stood alone in its criticism.

The Berlin leader said the opposition was "lacking in knowledge about economic matters" and noted that the majority of the EU finance ministers who approved the package to relax the stability pact came from the conservative camp.

His comments came as the opposition Christian Democratic Union (CDU) sharply criticised the Brussels deal.

CDU budget policy spokesman in parliament, Dietrich Austermann, called the agreement "the beginning of the end" of the stability pact and said that in reality it was aimed against German interests.

He said the agreement weakens the pressure on states to consolidate their finances and reduces the room for such future- oriented areas as research.

There were mixed receptions to the agreement on two other fronts in Germany, with criticism coming from the Munich-based think tank Ifo-Institut and backing from the German Trade Union Confederation DGB.

Ifo-Institut president Hans Werner Sinn criticised the Brussels agreement saying that it opened too much leeway to governments to go more heavily into debt.

"We ourselves must have an interest in seeing to it that we don't go too deeply into debt," Sinn said, adding that governments were always seeking to go into debt to help people feel good at the moment, "but this is a policy which leads nowhere".

In Frankfurt, DGB deputy chairwoman Ursula Engelen-Kiefer backed the agreement.

"We cannot save money to the point of killing ourselves," she said, reflecting the opinion of the camp which argues that a too-rigid application of the debt rules can also be damaging to the economy.

At the EU finance ministers' meeting over the weekend, Germany was among the countries arguing for a relaxation of the stability rules on budget deficits, on grounds that special factors should have to be taken into consideration. In its own case, Germany noted the huge strains of the cost of reunification.

DPA

Subject: German news

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