Interest rates to increase in wake of German and French defiance

THE de facto smashing of the stability and growth pact early yesterday morning will result in a rise in interest rates as the European Central Bank (ECB) warned of serious dangers following the move.

Commenting on the decision of EU Finance Ministers (ECOFIN) not to impose sanctions on France and Germany for allowing their budgets to exceed 3% of GDP, the ECB Governing Council said: "The conclusions adopted by the ECOFIN Council carry serious dangers.

"The failure to go along with the rules and procedures foreseen in the Stability and Growth Pact risks undermining the credibility of the institutional framework and the confidence in sound public finances of Member States across the euro area.