BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Thursday, 17 October, 2002, 13:32 GMT 14:32 UK
Row over 'stupid' EU budget rules
EU member flags
EU member states are sick of budget straitjackets
The system under which Brussels regulates EU member states' budgets is at the centre of a growing row, after the president of the European Commission called it "stupid".


The idea of having divergent economic policies is totally crazy

Romano Prodi
Romano Prodi told Le Monde newspaper that the EU needed rules to keep individual countries from running up huge deficits and undermining investor confidence in the euro.

But he added that current rules were "rigid".

Mr Prodi's remarks, which have been played down by the commission, come at a time when Europe's budgets are under almost unbearable strain.

The German government admitted for the first time on Wednesday that it would probably breach EU budget guidelines this year, and France, Italy and Portugal are believed to be in a similar position.

Politicians around Europe have for years called for amendments to the so-called "stability and growth pact" budget rules, but Brussels has resisted change.

Plan backfires

The pact was agreed by governments in 1997 - ironically, at the insistence of Germany - as a means of ensuring that investors would have faith in the European economy ahead of the launch of the euro.

Romano Prodi
The Pact is "stupid"; the alternative is "crazy", Mr Prodi says

It aimed to prove that EU member states, although allowed much leeway in economic policy, were abiding by the same fiscal principles.

The pact imposes a compulsory limit on public deficits of 3% of annual economic output, and lays out a system of warnings and punishments for offenders.

This year, as a number of countries have come close to breaching the 3% ceiling, some governments have argued that they need the freedom to boost spending as the global economy slows.

Nothing's perfect

Mr Prodi's remarks to Le Monde were an attempt to defend the principles behind the pact.

German Finance Minister Hans Eichel
German Finance Minister Hans Eichel is overspending

"I know very well that the stability pact is stupid, like all rigid decisions. If we want to adjust these, unanimity is needed and it doesn't work," he said.

"The stability pact is imperfect, it's true, because there is a need for a more intelligent tool and more flexibility."

But he flatly denied that any increase in flexibility could lead to a complete release of pact shackles.

"The idea of having divergent economic policies is totally crazy," he said.

 WATCH/LISTEN
 ON THIS STORY
Romano Prodi, president European Commission
"But we consider the stability pact a rule of the idiot"
See also:

16 Oct 02 | Business
30 Sep 02 | Business
26 Sep 02 | Business
25 Sep 02 | Business
24 Sep 02 | Business
02 Sep 02 | Business
10 Jul 02 | Business
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes