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Last Updated: Sunday, 20 March, 2005, 13:59 GMT
EU ministers mull stability pact
European finance ministers are meeting in Brussels on Sunday to discuss changes to the Growth and Stability Pact governing the euro.

The agreement limits the size of a nation's budget deficit and has been criticised for not letting governments boost economic growth by spending more.

France and Germany are pushing for greater freedom to break the rules.

This is being strongly opposed by smaller member states, such as the Netherlands and Austria.

Good feeling?

Ministers were optimistic that a compromise could be reached despite similar talks breaking down earlier this month without agreement.

"I am confident we will advance," said Pedro Solbes, Spain's economy minister.

We have the premise to reach an agreement
Domenico Siniscalco, Italian economy minister

Luxembourg's Prime Minister Jean-Claude Juncker, who tabled a number of proposals aimed at breaking the deadlock, said that "if common sense prevails we should be able to find an agreement".

Among other things, the Growth and Stability Pact states that a country's budget deficit must not top 3% of its gross domestic product (GDP).

Under the new plans put forward on Friday, the deficit limit would stay at 3% of GDP, but countries would be allowed to break that level in special circumstances and only for a limited period.

"I believe that the draft proposed by Mr Juncker is a significant improvement compared to the previous one," said Domenico Siniscalco, Italy's economy minister. "We have the premise to reach an agreement."

Too tough

France and Germany have bust the 3% deficit limit in every one of the past three years, and along with Italy are calling for greater freedom to increase state spending.

They argue that the rules were put in place when economic growth was stronger and make no allowance for more difficult times.

As economies sputter governments are faced with higher costs relating to payments such as unemployment benefits, as well as pressure from voters to act as a catalyst for growth.

The failure of the European Union to sanction France and Germany for their oversized deficits has led some observers to state that the Pact is effectively dead in the water.

Italian Prime Minister Silvio Berlusconi, facing a bleak economic picture at home, told business leaders on Saturday that he would put up a "great fight" to get the Pact relaxed.

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