Euro reform top of union presidency agenda

Luxembourg Prime Minister Jean Claude Juncker, who assumed the European Union presidency on January 1, will aim to focus on reforming the rules that govern the euro currency when he meets with the European Commission today.

The meeting with the 25-member EU executive under Commission President Jose Manuel Barroso will give priority to finding ways for the EU to ease the restrictive stability pact on the single currency.

As Luxembourg holds the EU tiller in the first half of 2005, Juncker will also push for an overall EU financing framework for 2007-2013, and ensure the EU makes good on aid promises to Asian nations hit by the Dec. 26 tsunami.

The EU has promised €123m in humanitarian aid, €350m in reconstruction assistance and €1bn in soft loans.

Juncker also is counting on a March EU summit to show signs that EU governments will inject new dynamism into Europe’s lackluster economy.

At a Lisbon summit in 2000, they pledged to make Europe the world’s most competitive, productive economy by 2010. At the halfway mark, much remains undone. The EU economy lags far behind the US, and unemployment remains stuck at over 8%.

On the euro, Juncker is seeking to loosen the economic and financial criteria for the 12 nations that share the currency, especially the requirement banning annual budget deficits of more than 3% of gross domestic product.

France and Germany have exceeded that ceiling in recent years, and have narrowly escaped stiff fines by the EU head office.

They argue that the traditional steps to bringing deficits under the 3% ceiling – spending cuts and/or tax increases – only aggravate their economies, which are key to overall EU growth.

Juncker said last week that when “economies are in good shape, we must be able to force member states to reduce their indebtedness and their deficits”.

If not, the EU should see if a government “has lost control of its spending or if it has made major investments. We must also see if it has a small or high debt”, he said.

The EU is continuing infringement procedures against Athens for misrepresenting its economic statistics between 1997 and 2003. By painting a rosy economic picture, Greece wrongly qualified for the euro.