AMSTERDAM — The Netherlands appears to be backing down on its demand that a guarantee be built into the new European Constitution ensuring the penalisation of nations whose budget deficits breach the euro stability pact.

After Germany and France escaped fines for running budget deficits in recent years breaching the maximum set by the stability pact, the Dutch government demanded that in future the European Court of Justice monitor that the regulations are adhered to.

By having it clearly stated in the new EU Constitution that the court would act as a guard dog of the pact, the Netherlands hoped to prevent EU nations again escaping penalties for running deficits larger than the maximum allowed 3 percent of Gross Domestic Product (GDP) laid out in the pact.

But Foreign Minister Ben Bot said Germany only wants to give the court a role in procedural matters, but not over the details of a case, such as whether a member state has violated the regulations of the stability pact.

And instead of the Dutch demand for the court to take on an active guard dog role, Minister Bot said the constitution will probably only contain the words: “treaties must be observed and stability is important for Europe”.

The problem for the Netherlands is that it failed to gain almost no support from other nations for its demand. Many countries agree with Germany and France that the pact is too strict. Germany and France also said cutting budget deficits under the 3 percent limit would have harmed the economic recovery.

But the Netherlands was also annoyed that Germany and France used their respective political might to convince other EU states to thwart the looming penalty from the European Commission last November.

The EC rejected the decision and lodged legal action in the European Court, but it will be some time before a ruling is made, newspaper De Volkskrant reported on Tuesday.

And the diplomatic position of the Netherlands did not improved after it was revealed that the Dutch also ran a budget deficit above the 3 percent maximum in 2003. Finance Minister Gerrit Zalm has since taken extra economising measures to ensure the budget comes under the maximum in 2004.

Bot said the Netherlands is not backing down on its demand that the veto right remain when it comes to multiple year EU budgets.

[Copyright Expatica News 2004]

Subject: Dutch news