France wants changes to EU stability pact: Lagarde

3rd May 2010, Comments 0 comments

France called Monday for changes to the EU stability pact that lays out strict rules for public spending, following Europe's massive bailout of Greece.

Finance Minister Christine Lagarde told Le Monde newspaper that advance warning systems were needed to prevent a repeat of the Greek crisis and that new criteria must be decided to monitor the eurozone's 16 members.

"We must imperatively place under our radarscope the monitoring of competitiveness and financial stability," Lagarde said in the interview.

Not enough attention has been placed on the growing gap between Germany's export-driven economy and the mounting debt problems facing Greece, Portugal and Ireland, all within the eurozone, said Lagarde.

European finance ministers on Sunday launched a 110-billion-euro bailout to save Greece's economy and shore up the euro amid fears of a chain reaction across the single-currency zone.

"With this plan, Greece is completely protected for two and a half years," said Lagarde, rejecting suggestion that Spain and Portugal would also face a crisis over their public finances.

"They are not at all in the same situation. They did not provide false figures, talk nonsense over their deficits," she said.

Lagarde acknowledged that changes to the EU Stability and Growth Pact, adopted in 1997, had been under discussion for years, but argued the Greek crisis had brought new urgency to the debate.

"When it ends up costing you 110 billion euros, you do change your approach," she said.

The pact notably dictates that member states must not let their budget deficits climb higher than three percent of GDP. Greece's deficit is on track to reach 8.1 percent of GDP this year.

France and Germany are also looking at tightening surveillance of rating agencies such as Standard and Poor's, accused of compounding the Greek crisis when it cut its rate to junk status last week.

The Stability and Growth Pact, originally intended by Germany to be a rigorous corset to ensure convergence of eurozone public finances and prevent a Greece-style crisis, was subsequently diluted owing to opposition by some other leading eurozone countries.

Lagarde has argued recently that Germany was running an unsustainably big trade surplus with the rest of the eurozone.

© 2010 AFP

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