Posted on 08/19/2003 1:58:21 PM PDT by knighthawk
The European Commission has warned Germany that it could face the imposition of radical restrictions on its domestic fiscal policymaking as early as next year if it looks set to exceed the stability pact's deficit limit in 2004.
"If Germany breaches the stability pact's 3 per cent ceiling next year, we will present [the] ecofin [group of ministers] with a new recommendation. It is our duty," said Pedro Solbes, the European Unions's monetary affairs commissioner in an interview with FT Deutschland.
Mr Solbes' warning puts greater pressure on the German government to bring its fiscal system under control.
Mr Solbes said the Commission could put forward its recommendation by the end of this year if its forecast in November were to show that Germany's budget would exceed the EU's stability pact deficit ceiling of 3 per cent of gross domestic product.
"The timing is open. It will depend on the developments of the next few months," said Mr Solbes.
Gerhard Schröder, the German chancellor, hinted in an interview with the FT last month that breaching the stability pact for a third year running in 2004 had not been ruled out.
Despite the recent brightening of Germany's economic outlook, few economists expect the economy to manage anything more than 0.2 per cent growth for the full year.
Some upbeat forecasts predict growth could pick up to about 1.7 per cent in 2004. But that would still be below the 2 per cent that the government says is needed to keep the budget deficit below 3 per cent.
If Germany breaches the pact for the third year running in 2004, EU rules demand that Brussels impose the stability pact's highest political sanction: Ecofin, the council of EU finance ministers, would have the right to impose fiscally binding sanctions against Germany.
If Germany did not implement the measures demanded, the EU ministers could demand the payment of an interest-free deposit - which would be converted into a punitive fine after two years if the eurozone's largest economy were still in breach of the pact.
Jacques Chirac, French president, last month called for a "temporary softening" of the EU stability pact to make it more flexible and help stimulate growth - further fuelling the debate on eurozone fiscal policy.
Smaller EU states such as Greece complain that their bigger neighbours are threatening the economies of the small countries by flouting budget rules.
The smaller countries are worried that big states could use their voting power to block the imposition of sanctions or fines.
Mr Solbes dismissed the possibility of big countries such as Germany and France - which also risks a third year above the deficit limit - being able to flout the pact. "I am aware of these considerations. But the pact has to be applied. I don't expect any changes from the Commission on this matter," said Mr Solbes.
If people want on or off this list, please let me know.
So who else besides Germany might get France's approval for a "temporary softening" when their economy runs amuck? It's doubtful that Eastern European countries will get any slack from the Union, and France and Germany will remain the big two pigs at the EU trough. They are, afterall, more equal than others.
Greece and the other smaller EU countries (everyone but France and Germany) are just seeing the handwriting on the wall. The entire purpose of the EU, from the perspective of France and Germany, is to provide these two corrupt, all but openly communist states a steady source of cash and assets to prop up and subsidize their rotting utopian regimes. It's kind of like Gray Davis announcing that he will fix California's budget problems by raiding the treasuries of Florida, Colorado and the other states that didn't get hurt too badly by the recession.
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