The European Commission has denied that a deal was hatched at last weekend's Ecofin summit to re-open the Stability and Growth Pact. Germany's finance ministry also dismissed the story, which appeared in one of the country's business magazines, that EU ministers had decided at a weekend meeting in Copenhagen to postpone by a couple of years a 2004 deadline for balancing their budgets.
The pact, designed in the run-up to Economic and Monetary Union (EMU), sets out a path to fiscal consolidation, outlaws national budget deficits above 3 per cent of gross domestic product and insists on balanced books by 2004.
Speculation about behind-the- scenes moves continued after the Italian Economy Minister, Mr Giulio Tremonti, whose government colleagues have been openly campaigning for an overhaul of the pact, said its [the pact's\] reinterpretation was impossible, but allowed that a margin of flexibility would be explored. Mr Tremonti was addressing a gathering of industrialists in Rome.
But his Belgian counterpart, Mr Didier Reynders, told a business gathering in Paris yesterday that this was the wrong time to discuss overhauling the rules, because they were not being respected.
And the European Commission, which has the tough task of policing EU budgets, flatly rejected suggestions that the decision to ease it had already been taken behind closed doors.
"There is no secret deal on extending the balanced budget deadline beyond 2004 and the issue was not discussed in Copenhagen," said Commission spokesman Mr Gerassimos Thomas.
German magazine Wirtschaftswoche, in an advance copy of an article to appear today, said ministers had agreed with EU Monetary Affairs Commissioner Mr Pedro Solbes in Copenhagen to allow a slower deficit reduction.
"An adjustment for the economic conditions" had been agreed internally, the magazine quoted unidentified government sources in Berlin and Paris as saying. The sources said the balanced budget goal could be reached "a year or two later".
But a spokesman for the German finance ministry said: "The Stability and Growth Pact was not discussed in Copenhagen. There was no reason to have such a discussion."
Ministers in Copenhagen had publicly backed the pact, or kept their private misgivings to themselves.
But France pointed out that it was not obliged to respect the impossible and Germany won leniency to exclude the cost of devastating floods from its deficit calculations.
Most private economists say that an overhaul of the rules is inevitable and would also make sound economic sense, since the alternative would be to cut public spending while growth was still weak at the euro zone's core, making matters worse.
But the economists believe there will be no change until after the German election on September 22nd, echoing a view expressed by Italian Prime Minister Mr Silvio Berlusconi that the balanced budget deadline would be discussed after that date.- (Reuters)
