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Last Updated: Monday, 21 March, 2005, 17:49 GMT
ECB 'concerned' about euro deal
European Central Bank head Jean-Claude Trichet
The ECB president had hinted he might like to see tougher penalties
The European Central Bank (ECB) has expressed "serious concern" over plans to ease the Stability and Growth Pact rules for eurozone countries.

Under the proposed measures it will be easier for euro members to keep their deficits within 3% of national output.

The move comes after Germany and France, who have breached the limit for the past three years, pressed for less stringent rules amid slowing growth.

The package of measures is expected to be approved by EU leaders this week.

The new rules are designed to give European ministers more flexibility over the costs they can exclude when adding up their deficits.

Interest rate pressure

"The Governing Council of the ECB is seriously concerned about the proposed changes to the Stability and Growth Pact," the institution said in a statement on Monday.

"It must be avoided that changes in the corrective arm undermine confidence in the fiscal framework of the European Union and the sustainability of public finances in the euro area member states."

The ECB did, however, note that the new rules may encourage some nations to reduce their deficits

Its statement follow similar remarks in the past.

At a recent committee of the European Parliament, ECB president Jean-Claude Trichet indicated he would have liked to see the penalties against countries which break the rules strengthened.

Some economists shared the concerns, saying a greater tolerance of higher deficits could put pressure on ECB-set interest rates in the euro zone.

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