Stability Pact reform looms

Ann Cahill

Mr Junker, who as Luxembourg prime minister, took over the role of EU President this month, indicated a measure of flexibility will be introduced to the pact. The set of rules have been stretched to breaking by France and Germany in particular breaching its 3% budget deficit limit several times.

A number of finance ministers have been pushing for a more flexible interpretation of the rules, especially regarding budget deficits.

They want, in particular, greater emphasis on prudent management of national finances during good times with money being set aside for economic downturns. This, they argue, should make up for greater borrowing if necessary during recession-type conditions.

Mr Junker said he did not intend to eliminate the stability aspect of the pact, which was essential to the well being of the euro, but, he went on to say, “during years of robust growth we need to take advantage of ways in which we can better deal with stagnation or recession and we will look into such details over the next few weeks.”