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EU Approves Compromise for French, German Budget Deficits - 2003-11-25

EU finance ministers have approved a compromise to deal with France and Germany's breaking of EU budget deficit rules, which were established as a basis for the euro currency. The move is controversial, and several smaller EU nations are protesting.

The 12 countries that use the euro are legally bound by a Stability and Growth Pact that limits their budget deficits to three percent a year. But France and Germany, which are both having economic troubles, have violated the limit since last year.

Instead of sanctions, EU finance ministers have recommended that both countries end their excessive deficit by 2005.

The ministers could have imposed fines on France and Germany. But the ministers said they would hold off on disciplinary action for the time being.

The EU executive Commission is charged with enforcing the pact, and Economic Commissioner Pedro Solbes expressed disappointment with the compromise.

"The Commission deeply regrets that these proposals are not following the spirits and the rules of the treaty and the Stability and Growth pact that were agreed unanimously by all member states," he said. "We think that only a rule-based system can guarantee that commitments are enforced and that all member states are treated equally."

Commissioner Solbes also stressed that the EU Stability and Growth pact is not suspended.

Some small EU nations complained that large countries are bending the rules. Austria did not support the deal and Austrian Finance Minister Karl-Heinz Grasser said the procedure used to enable France and Germany to evade disciplinary action is unacceptable.

Belgium agreed to the compromise, but its finance minister, Didier Reynders, called the precedent dangerous.