The European Commission today suggested ways of revamping the EU's Stability and Growth Pact and said change was vital to restoring the credibility of its much-flouted budget discipline rules.
On the one hand it was willing to consider loosening some elements of the pact, for example by redefining the circumstances under which countries that break the pact's deficit cap can escape disciplinary action.
It also wants to take account of economic developments when setting budgetary tightening deadlines, giving more time to those hit by economic downturns, and tailor medium-term budget goals to countries' individual circumstances rather than insisting on balanced budgets.
But it balanced these suggestions with calls for earlier action to head off poor budget policies and tightening up monitoring of debt reduction.
"It is my firm belief that these proposals will provide for a stronger and more credible Pact," European Commission President Mr Romano Prodi said in a statement.
Economic and Monetary Affairs Commissioner Mr Joaquin Almunia said in the Commission statement that the proposals introduced more economic rationale in the implementation of the pact while also strengthening surveillance and enforcement.
Moves to overhaul the Stability Pact, which underpins the euro, took on new momentum after a series of clashes between the Commission and EU finance ministers over how strictly its rules and disciplinary procedures should be applied.
Relations between the two sides hit a low in November 2003 when ministers suspended disciplinary action against Germany and France, which are expected to break the pact's deficit cap of three percent of gross domestic product for the third year in a row in 2004.