EU member states want additional changes to stability pact

European Union member states are hoping that the strict budget rules enshrined in the Stability and Growth Pact will be softened even further beyond the proposals recently put forward by the EU Commission in Brussels, press reports stated.

A working paper drawn up by the EU economic and finance committee contained a whole catalogue of desiderata by EU member states and that paper would serve as a basis for discussions by Euro group finance ministers in Brussels, the reports said.

The dailies Handelsblatt and Frankfurter Allgemeine Zeitung said that the proposals included greater magnanimity towards countries with big public deficits if those countries are net contributors to EU budget, as in the case of Germany.

Such proposals did, however, draw sharp criticism from the EU's budget commissioner Michaele Schreyer, who told the daily Die Welt in an interview that excluding countries' EU contributions would effectively be a "fundamental alteration of the stability pact".

Schreyer said that "if contributions to the EU budget are taken out of the calculation of the national deficits, the heads of state and governments might as well just raise the deficit limit to 3.5 percent or 4.0 percent" of gross domestic product.

Under the terms of the stability pact, eurozone members are currently not allowed to run up deficits in excess of 3.0 percent of GDP, a rule that an increasing number of countries are finding it difficult to stick to.

Schreyer said in a separate interview with the Frankfurter Allgemeine Zeitung that the German deficit ratio would still be in breach of the 3.0-percent rule, even if its payments to the EU budget were taken out of the equation.

Germany's contribution to the EU budget would amount to around 0.36 percent of GDP, while its deficit ratio was expected to reach 3.9 percent, she calculated. Among the other changes being proposed by EU member states was the suggestion that a country be treated more leniently if its excessive deficit is a result of unexpected economic weakness rather than spendthrift fiscal
policies.    Furthermore, the volume of public investment and the reforms of state pensions should also be taken into account, countries suggested.