THE EUROPEAN Commission will press for the most flexible possible implementation of euro-zone budget rules after world leaders agreed in Washington to a set of measures aimed at boosting economic growth.
Speaking after the Group of 20 (G20) summit at the weekend, Commission president José Manuel Barroso said that although the Stability and Growth Pact had to be respected, increasing economic growth was a vital European interest.
"Our understanding is that it allows for sufficient flexibility in exceptional circumstances, and we are living in exceptional circumstances," he said.
The move could give the Government more breathing space over its spending, after the commission took action against Ireland earlier this month over its rising budget deficit.
Under the pact, EU states are required to keep their budget deficit to gross domestic product ratio below a 3 per cent limit. Ireland's deficit is expected to hit 5.5 per cent this year and 6.5 per cent in 2009, something which could lead to heavy fines under EU rules.
The G20 leaders, who included representatives from China, India, Brazil, Saudi Arabia and South Africa as well as the US and the EU, agreed an action plan to address the financial and economic crisis.
They agreed to improve oversight of financial markets, to co-ordinate regulation through a new "college of supervisors" and to reform the International Monetary Fund and the World Bank so that emerging economies would be better represented.
"Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed, based on closer macro-economic co-operation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries," the leaders said in their closing statement.
European leaders expressed satisfaction that the summit had agreed to improve the regulation of credit rating agencies and hedge funds and to consider measures to curb excessive pay for risk-taking executives in financial institutions.
"It is historic to have here in the United States an American administration - where Republicans and Democrats have refused to move on issues such as these - to have agreed to a shift," said French president Nicolas Sarkozy.
Mr Barroso agreed that the summit reflected an international consensus which was moving behind principles that have long been favoured within the EU, including the importance of regulating markets and the value of international economic co-operation.
US president George W Bush insisted, however, that the leaders had also reaffirmed their faith in free market principles, noting that the surest path to . . . growth was "free market capitalism".The next summit will be on April 30th.