Prodi defiant as MEPs attack his euro criticisms

European Commission president calls monetary rules 'stupid' as poll shows lack of enthusiasm for enlargement across continent

Romano Prodi, the European Commission president, last night faced down his critics, defending controversial claims that rules governing the euro are "stupid" and demanding more power to police economic policy.

In a defiant performance at the European Parliament, Mr Prodi repeated the word that sparked the furore – "stupid" – and claimed he was only saying publicly what most politicians argue in private.

Last week the European Commission president caused a political storm with his blunt attack on the euro's rulebook, the Stability and Growth Pact, in the French daily Le Monde.

The pact lays down binding rules for the 12 nations inside the euro, including the stipulation that their budget deficits must not exceed 3 per cent of gross domestic product.

However it has been under increasing strain with Germany and France at risk of hitting the 3 per cent ceiling, Italy in difficulty and Portugal already in breach of the rules.

In Strasbourg yesterday Hans-Gert Pöttering, who heads the biggest bloc of centre-right MEPs, led the attack on Mr Prodi, saying he had been left "speechless" by the Commission president's comments, and called on him to admit his mistake.

But, significantly, Mr Pöttering did not repeat calls from Edmund Stoiber, the unsuccessful challenger in Germany's recent elections, that Mr Prodi should resign.

Although it was his worst ever mauling at the hands of MEPs, Mr Prodi stuck to his guns, refusing to acknowledge the widespread view that he made a sizeable gaffe.

Yesterday he told MEPs that "awareness of the extraordinary things the pact has brought about" should not blind the EU to "the limitations of the institutional framework in which it is applied".

He added: "Still less does it mean enforcing the pact inflexibly and dogmatically, regardless of changing circum- stances. That is what I called – and still call – stupid."

In fact that refined the criticism of the pact, because the words in Le Monde which sparked the row were significantly less nuanced. Then Mr Prodi said bluntly: "I know very well that the stability pact is stupid, like all decisions which are rigid."

But during yesterday's parliamentary session, the European Commission president won the support of many socialist, centre-left and Green parliamentarians who agree that strict adherence to the pact during an economic downturn could destroy thousands of jobs.

In fact the pact has a formidable collection of public critics, including Gordon Brown, the Chancellor of the Exchequer, and Pascal Lamy, one of France's two European Commissioners, who has described it as "medieval".

There is now a consensus that reforms must produce rules which allow sufficient flexibility to allow governments to borrow during downturns. The quid pro quo demanded by Brussels is that bigger efforts must be made to cut deficits when times are good.

Mr Prodi argued for changes that would allow the Commission alone to issue an "early warning" to a member state which is close to breaking the rules. At present EU finance ministers need to endorse such a warning and Germany managed to avert such as prospect earlier this year by lobbying ministers.

Last night Mr Prodi's aides insisted he was pleased to have sparked a debate on economic policy. "This discussion is what Prodi wants," said one.