The Hindu : International : E.U. members closer to pact on reform

Online edition of India's National Newspaper
Friday, Dec 24, 2004

International

International

E.U. members closer to pact on reform

By David Gow

BRUSSELS, DEC. 23. The European Commission expects its 25 member Governments to agree on a significant loosening of the controversial stability and growth pact by spring to kick start faltering economic growth and create more jobs in the Eurozone. Joaquin Almunia, Economic and Monetary Affairs Commissioner, has indicated that reform of the pact, which limits budget deficits to 3 per cent and national debt to 60 per cent of GDP, should be agreed at the March E.U. summit.

The reforms are sought by a large number of troubled Governments struggling with low growth and prolonged unemployment but opposed by disciplinarian countries worried that the pact will be rendered even more meaningless after last week's decision to let serial sinners France and Germany off the hook.

Found guilty

They could be agreed along with changes to the so-called Lisbon strategy, which aims to make the E.U. the world's most dynamic knowledge-based economy, overtaking the U.S. in terms of innovation, job-creation and sustainable growth — at a time when the U.S. is growing at 4 per cent and the Eurozone at under 2 per cent.

Mr. Almunia, who is likely to revise down his forecast of 2 per cent growth in the zone in 2005 because of the impact of the soaring euro on exports, said: ``I am quite optimistic that we will be able to reach agreement [on pact reform] within the first few months of next year.''

His comments came as the Commission set in train measures to penalise Greece, already found guilty of supplying false deficit figures before it entered the euro in 2002, for overstepping the 3 per cent ceiling with a likely deficit of 5.3 per cent this year and 3.6 per cent in 2005 — even without the special effect of the 2004 Olympic Games next year. The Greeks, who could ultimately face fines of several billion euros, as France and Germany did until last week, has told Brussels that it can trim the deficit to 2.8 per cent in 2005 but Mr. Almunia said, even with the highest growth in the euro area, Greece ``has taken no effective action to correct its excessive deficit''.Hungary, a non-Euro member, was also rapped on the knuckles. France and Germany, which are judged to be ``on track'' with targets of 3 per cent and 2.9 per cent in 2005, are being kept under close surveillance while Holland, Italy and Portugal are under a watchful eye. —

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