Germany urges 'reinforced' budget discipline

17th May 2010, Comments 0 comments

Germany's finance minister on Monday urged eurozone partners to "reinforce" budgetary discipline and accelerate public finance cuts, without ruling out a push for a legal limit to deficits.

Wolfgang Schaeuble said that, in order to reassure financial markets and halt the rapid fall in the euro's value against the dollar, the reduction of deficits had to be the "number one objective" in Europe as elsewhere.

"Everyone has to meet that" goal, Schaeuble said on arrival for a monthly meeting of eurozone finance ministers in Brussels, with markets still tumbling eight days after a near trillion-dollar rescue plan was agreed among them.

Germany has passed a law that applies a "brake" to deficits going towards 2020, and Schaeuble said that the eurozone's Stability and Growth Pact, which theoretically limits deficits to three percent of national output, could operate in a similar way.

"The brake on deficits is a particularly German term," he said. "The stability pact is also a sort of brake on deficits."

While he said that the "whole world does not need to be re-modelled in Germany's image," Schaeuble nevertheless said it was a "question" that merited further discussion and could form one of the lessons from the current debt crisis going forward.

The German constitution now forces Berlin to reduce its deficit from 2011 to a limit of 0.35 percent of gross domestic product until 2016, almost one tenth of the limit in the stability pact, and which equates to roughly 10 billion euros per year.

Berlin will lay out its thoughts on Friday when EU president Herman Van Rompuy hosts the first meeting of a task force set up to decide rules for common EU economic 'governance' by the end of this year.

© 2010 AFP

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