EU rebukes Germany over euro rules
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Your support makes all the difference.Germany suffered the humiliation yesterday of being told it had broken the tough rules that underpin the euro and which it had insisted on introducing.
The European Commission, ordering the government in Berlin to mend its ways, said Germany had breached the central element of the euro's rulebook last year and could do so again in 2003.
The dressing-down will increase domestic pressure on Chancellor Gerhard Schröder, whose popularity has slumped since his election victory last year. Yesterday's announcement from the European Commission was also critical of France, saying that the government in Paris was in danger of hitting the budget deficit ceiling of 3 per cent of GDP.
Italy was criticised for relying heavily on one-off measures and basing its projections on "optimistic" economic forecasts. But while France has yet to break the 3 per cent threshold, Germany has crossed the line. Its deficit last year reached an estimated 3.75 per cent. Pedro Solbes, the European commissioner for economic and monetary affairs, is sceptical of projections from Berlin that its deficit will be brought down to 2.75 per cent this year. The Commission recommended that EU finance ministers give Berlin a four-month deadline to enact measures to cut the deficit. If it does not, the government could ultimately be heavily fined.
The so-called stability and growth pact, inspired by the German Bundesbank, was intended to hold in check the finances of smaller, poorer eurozone member states or those with a weak economic record such as Italy.Mr Solbes' statement was designed to bolster the pact, which was described as "stupid" by the European Commission president, Romano Prodi, last year.
Mr Solbes' allies see the reprimand as a vindication of the Commission's policies last year when it suggested giving Germany an early warning. The government lobbied hard to avert a formal reprimand. This time it is not expected to oppose the action.
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