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Monday, 11 February, 2002, 13:50 GMT
Storm looms at EU meeting
German finance minister Hans Eichel
German finance minister Hans Eichel will be the centre of attention on Tuesday
A row over a European Commission call to condemn Germany over a rising budget deficit threatens to turn a meeting of the EU's 15 economy and finance ministers into a stormy affair.

The ministers must vote at Tuesday's meeting on whether to uphold the recommendation that Germany be reprimanded over its deficit.

But opinion is thought to be divided, with media reports saying that several ministers are preparing to oppose the commission's proposal.

The meeting will consider two other controversial issues - the future presidency of the European Central Bank, and the UK's level of spending on its public services.

Embarrassment

Earlier this month, the commission voted to issue a formal warning to Germany and Portugal over the sizes of their budget deficits.

While neither Germany nor Portugal has yet breached the 3% deficit limit both are at risk of doing so this year, prompting the commissioner for monetary affairs, Pedro Solbes, to ask for the warning.


Far too narrow a view of the stability pact has been taken by the Commission generally

Gordon Brown, UK chancellor

But several ministers have hinted that they feel the commission is being over-zealous, especially where Germany is concerned.

The official warnings have never been used before, but are designed to enforce the eurozone's growth and stability pact.

In 1997, member countries set out a sequence of sanctions for countries which looked likely to break the 3% ceiling.

Mr Brown's position

"Far too narrow a view of the stability pact has been taken by the commission generally," UK Chancellor Gordon Brown said at the weekend.

UK Chancellor Gordon Brown
Mr Brown is after greater leniency

But Mr Brown is also seeking more leniency from the EU over the UK's level of spending on public services such as transport and health.

The UK is set to receive a less severe warning from the commission.

But Mr Brown is thought to be ready to refuse the commission's request to rein in public spending to the tune of 10bn.

Sideline negotiations

There is speculation that the controversy was being discussed at the sidelines of last weekend's G7 meeting of the world's seven leading industrialised nations

Gordon Brown, telephoned his German counterpart Hans Eichel at the weekend to offer his backing, according to a report in the Financial Times newspaper.

European Commissioner for Monetary Affairs, Pedro Solbes
Mr Solbes requested Germany's reprimand

France's position is less clear with some sources saying that France is keen to stand by the stability pact.

But there are also unsubstantiated rumours that France will help Germany out in exchange for Germany giving its backing to Jean-Claude Trichet as the next president of the European Central Bank.

With the backing of Portugal and Britain, Germany is thought only to need the backing of one other country to see off the reprimand under a qualified majority voting system which gives more votes to larger countries.

Holding firm

But the commission is sticking to its guns.

"The issue of credibility of the treaty and the process is very important," Gerrasimos Thomas, spokesman for Mr Solbes, said.

Mr Thomas added that EU ministers must not do anything that would set a precedent for ignoring future warning procedures.

And he pointed out that the commission was only implementing what the member states had previously agreed.

One compromise would be postponing the decision until more economic data is available.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Jonty Bloom in Brussels
"Germany has been hit hard by the worldwide economic slowdown"
Steve Barrow, Bear Stearns
"This is the first step on a long path of potential budget warnings"
See also:

30 Jan 02 | Business
Q&A: EU budget warnings
30 Jan 02 | Business
EU raps Berlin and Lisbon on budgets
07 Feb 02 | Business
Duisenberg to quit ECB
21 Jan 02 | Business
Budget worries at euro talks
04 Dec 01 | Business
EU eyes German budget deficit
22 Nov 01 | Business
Rich countries on the brink
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