EU reprimands Greece in budget pact talks

EU finance ministers reported progress towards loosening budget rules that France and Germany have repeatedly breached but criticised…

EU finance ministers reported progress towards loosening budget rules that France and Germany have repeatedly breached but criticised Greece for flouting them.

After lengthy talks on adjusting the Stability and Growth Pact, ministers ordered Greece to cut its deficit after revelations it overshot the pact's limits for much of the past decade.

Massive revisions to Greek budget data have shown it breaking the EU deficit cap every year since 1997. That highlighted a debate over the reliability of government accounts, but also the discontent the pact has generated in France and Germany as the euro zone's two biggest economies fell foul of the deficit limits.

The pact was established in the 1990s as a guarantee against government profligacy when the euro was launched. European Central Bank chief Mr Jean-Claude Trichet has said it is vital because high deficits can lead to higher interest rates.

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France and Germany breached the deficit limit of the pact, 3 per cent of gross domestic product, for a third year in 2004. Diplomats say one of the main strands of a revamp may be a more liberal let-off clause for countries with slow growth.

That could make it easier to spare countries who argue their case from the kind of disciplinary process that Greece faced today, which marked the closest a country has gone to fines under the pact in its current form.