Finance ministers face legal action Simon Jeffery and agencies The Guardian Tuesday January 13, 2004
The European commission today launched legal action against national finance ministers over their failure to discipline France and Germany for breaking the eurozone growth and stability pact. Last year's breach, which saw Germany break rules it instigated to protect its economy from inflation in southern Europe, went unpunished despite pleas from the commission for the two nations to be fined. The EU's council of finance ministers - which includes Gordon Brown, the UK chancellor - instead brushed aside the commission's recommendation and gave the eurozone's two largest economies an extra year's grace. A spokesman for the commission said a majority of its members now wanted to seek clarification from the European court of justice solely over whether the national ministers were right to effectively suspend the rulebook. "In our view, the council conclusion was not the appropriate procedure. We are not asking the court to give judgment on the economic aspects of the conclusion." But analysts have warned that the commission would be better advised to reform the pact than risk antagonising two of the EU's most important members. Agreed in 1997 by the 12 countries now using the euro, the growth and stability pact obliged eurozone members to keep budget deficits below 3% of gross domestic product. The intention was to stop Greece and Italy ramping up eurozone inflation by cutting taxes and funding government spending programmes on public borrowing. But a three-year recession in France and Germany resulting in lower tax receipts and increased public spending on unemployment benefits meant that neither government was last year prepared to keep within the pact's relatively narrow confines. The finance ministers' ruling means France and Germany therefore will be allowed to break the 3% rule again in 2004. Before today's announcement, the European parliament president, Pat Cox, had said the commission should take the "fragile state" of the French and German economies into account - as finance ministers did - when making its decision. "Rules are rules and, of course, one should try to make sure that the rules apply equally. But when you are applying rules you need also to apply common sense," he said.
