EC set to back court appeal on pact

Denis Staunton,

in Brussels

The European Commission (EC) is today expected to back an appeal to the EU's highest court against last November's decision by EU finance ministers to suspend the rules of the Stability and Growth Pact rather than punishing France and Germany for breaching the budget rules.

Commission sources said yesterday that a majority of commissioners were likely to support a move by the Economic and Monetary Affairs Commissioner, Mr Pedro Solbes, to the European Court of Justice to annul the finance ministers' decision. Some commissioners have expressed misgivings about the court action but the Budget Commissioner, Ms Michaela Schreyer, said yesterday that she expected a majority to support the move.

"I believe Mr Solbes' proposal will convince many people. The Commission has to be consistent and ensure that legal certainty is upheld," she said.

The Commission is expected to ask the court to use a fast-track procedure that will produce a verdict within three to six months.

The Minister for Finance, Mr McCreevy, said last week that the finance ministers received clearance from the Council of Ministers' legal service before they agreed to waive the budget rules in November. He warned the Commission against taking hasty action, calling instead for a period of reflection about the future of the pact.

Austria's finance minister, Mr Karl-Heinz Grasser, who voted against November's decision, said yesterday that the Commission's legal action was ill-advised. "I am not in favour of a lawsuit by the Commission in respect of the Stability and Growth Pact simply because I think it is the wrong political instrument," he said.

Mr Solbes argues that, as guardian of the EU treaty, the Commission has an obligation to ensure that the budget rules are properly enforced. The Commission's legal service believes that the finance ministers' decision was in breach of the treaty.

The President of the European Central Bank (ECB) last week declined to comment on the wisdom of legal action but two newspapers have reported that the ECB is unhappy about the move, fearing that it could undermine public confidence in European institutions.

Today's decision comes as Mr Solbes prepares to issue a proposal next month for the reform of the Stability and Growth Pact. The proposal is likely to suggest that levels of public debt, as well as health and pension costs, should be considered in calculating the level of budget deficit acceptable in each member-state.

A previous attempt to reform the pact failed after finance ministers were unable to agree on criteria for permitting flexibility and Mr McCreevy has expressed scepticism about the prospect of agreeing a reform during Ireland's EU Presidency.