McCreevy backs eurozone savings plan

Finance Minister Charlie McCreevy said he would support countries having to set money aside during the good times as part of a revised Growth and Stability Pact governing euro countries.

Economic and Monetary Affairs Commissioner, Pedro Solbes, is due to suggest a series of changes to the pact next month including a mandatory saving of money by eurozone states.

Mr Creevy, who chairs the council of EU finance ministers, said he would welcome this proposal although countries would not be able to set savings against deficit budgets.

He believes Mr Solbes will also suggest recognising the fact that a country has low debt in allowing greater capital spending on infrastructure, which is something Mr McCreevy has called for some time.

However, Mr McCreevy Mr Solbes will also suggest recognising the fact that a country has low debt in allowing greater capital spending on infrastructure, which is something Mr McCreevy has called for some time.

However, Mr McCreevy said while he would personally support such changes being made to the pact, he did not believe his fellow ministers felt the same.

"They would prefer a period of reflection. Some of them think we should see this year out before we think about it again," he said.

Mr Solbes is expected to unveil his proposals around February 20 and they will be discussed, possibly at the March Ecofin meeting.

Mr McCreevy said he did not believe any changes would remove the sanctions element of the pact. Ireland supported changes to the controversial rules governing the eurozone but had to admit defeat last March. Finance ministers have denied they have set aside the pact by failing to follow its rules in relation to France and Germany breaching the 3% budget deficit rule.

Mr McCreevy appeared before the Monetary Affairs Committee of the European Parliament yesterday to outline the aims of Ireland's presidency and answer questions. He reiterated that long-term strategy in relation to exchange rates has not changed.

"The euro must keep its value over the medium and long run, in line with economic fundamentals, in the present circumstances we particularly stress stability and we are concerned about excessive exchange rate moves" he said.

The Financial Perspectives the EU's budget for 2007 to 2013 will be outlined by the commission on February 10 and Ireland as president will have the job of setting out the timetable for negotiating it.

Bargaining has already begun with six of the bigger payers saying it must be limited to 1% of GDP.

Ireland will become a net contributor after 2006 but Mr McCreevy refused to say if Ireland would insist on the 1% ceiling. However, he said Ireland had benefited greatly from Europe's generosity and the theory of growing the economy so it would in turn contribute had proved successful.