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Last Updated: Wednesday, 19 November, 2003, 12:37 GMT
Solbes warns on EU budget fudge

By Ray Furlong
BBC correspondent in Berlin

Pedro Solbes
Mr Solbes insists there is no room for compromise
France and Germany have been told that any efforts to bend the EU's budget deficit rules will fail.

Economic and monetary affairs commissioner Pedro Solbes said a political compromise outside the eurozone framework would amount to abandoning the pact.

"We can't afford to solve our problems this time with a political compromise outside the framework," he said.

The pact sets a deficit limit of 3% of gross domestic product (GDP).

Recovery

The strongly worded warning was published in a guest column in the German business newspaper Handelsblatt.

It came a day after Germany's finance minister Hans Eichel rejected calls from the European Commission for more spending cuts than it had planned in next year's budget, with the eventual target of 2005 for getting its deficit within the Stability Pact limits.

Can we really afford to coordinate our economic policy, the most important pillar of our currency, by way of gentleman's agreements?
Pedro Solbes
European Economic and Monetary Affairs Commissioner
Mr Eichel said Germany was already making painful structural reforms.

More cuts would stifle Germany's economic recovery, he said.

France, which is also struggling to stick to the EU rules, took the same line.

Both France's and Germany's deficits exceeded the 3% limit in 2002 and are expected to do so again in 2003 and 2004 as well.

Gentlemen's agreements

In issuing the warning, Mr Solbes has further upped the stakes in the row over the French and German budget deficits.

A confrontation now seems all the more likely when EU Finance Ministers meet in Brussels next week.

While noting that sanctions are not being proposed yet, he said the threat of sanctions must remain credible.

"Can we really afford to coordinate our economic policy, the most important pillar of our currency, by way of gentleman's agreements?" he queried.

Mr Solbes also raised the question why a new EU constitution should be agreed upon when governments are not even willing to keep to the rules of existing treaties.




SEE ALSO:
EU calls time on German budget
18 Nov 03  |  Business
Most countries 'flouting EU rules'
11 Sep 03  |  Business


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