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Last Updated: Tuesday, 6 January, 2004, 00:06 GMT
Stability pact squabbles shake the euro

By Quentin Sommerville
BBC News Europe business reporter in Brussels

Euro banknotes
Any pretence of eurozone harmony was dispelled in 2003

Ten new member countries will enter the European Union in May this year, but it would be understandable if the 10 new finance ministers heading to Brussels are suffering a bout of last minute nerves.

Eager though they are to join what will become the world's biggest economic union, they must be wondering just what kind of club it is they are joining.

All will be aware that 2003 was not a great year for European economic solidarity.

The long running dispute over the proper enforcement of the Stability and Growth pact, the very rules which underpin the single currency, bust asunder any pretence that Europe's 15 existing member states could agree on what is best for their collective economies and for the euro.

Vague promise

The stability pact was effectively suspended last year, with France and Germany going unpunished for missing their 3% deficit for three years in a row.

Francis Mer, the French finance minister, says it is "excessive" to say the pact is in crisis.

And he boldly says that Europe's fiscal policy is still in alignment, referring implicitly to the fact that France and Germany have committed to reduce their budget deficits, albeit not by as much as the European Commission wanted.

Despite this upbeat assessment, the Commission is still considering legal action against finance ministers.

Breathing space

The guardian of the euro's stability, the European Central Bank, said it "deeply regretted" the move by finance ministers, warning that they were risking "serious dangers".

And the disharmony did not end there.

Smaller EU members, like the Netherlands and Austria, are still sizzling with fury at the decision to put the stability pact on ice.

It is probably a good thing then that it will be a while before the likes of the Czech Republic, Estonia, and Poland can qualify for membership of the single currency.

EU flags
Half mast: Is the euro's lifeline limited?

The accession countries must join the euro, unlike Denmark, the United Kingdom, and Sweden, who continue to put off membership.

But the new members have to get their economies in shape first.

The more ambitious were hoping to sign up as early as 2006, but that is looking increasingly unrealistic.

The controversy over the stability pact is not a thing of Christmas past; the sparks will continue to fly in 2004.

Germany and France are keen to have the pact redrafted, something other member states, and the European Central Bank, are determined to resist.

With single currency membership still some way off, Europe's ten new member states will probably be glad to have the breathing space.

How to save the EU stability pact
05 Dec 03  |  Business
Budget compromise attracts EU ire
25 Nov 03  |  Business
Solbes warns on EU budget fudge
19 Nov 03  |  Business
EU calls time on German budget
18 Nov 03  |  Business
Most countries 'flouting EU rules'
11 Sep 03  |  Business

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