McCreevy set for conflict over EU pact

FINANCE Minister Charlie McCreevy is set to become embroiled in the row over the French and German budget deficits as he takes over the chair of the EU Ecofin Council.

Next week the European Commission will decide whether to challenge the minister’s decision not to take action against the EU’s two largest economies over their breaching the rules of the Growth and Stability Pact.

Economic and Monetary Affairs Commissioner Pedro Solbes supported a legal challenge yesterday even though Commission President Romano Prodi indicated they might have to consider the political implications of such a decision.

Mr McCreevy, who will chair his first Ecofin meeting on January 20 in Brussels, has supported taking the issue to Court but said it should be done as quickly as possible. He believes the Council was acting within its rights in refusing to punish France and Germany and, instead, agreeing to give them time to bring their economies back into line with the Pact.

“There is a fast track for Court action, I understand, and I believe it would be as well if this was fast-tracked because I would accept it is not good if this issue was left in abeyance for any length of time,” he said yesterday. However, even if it was dealt with quickly, it could take up to six months before the Court of Justice in Luxembourg issues its ruling on whether the ministers went beyond their brief in refusing to accept the recommendation of the Commission on the issue. However, the minister will come under pressure at February’s meeting because, by then, the Commission will issue its latest report on the budget position of both France and Germany.

They are proceeding to monitor both economies, irrespective of the decision taken last December by the finance ministers to allow the countries proceed as they proposed with their own timetable for bringing their deficits under 3%.

Mr Solbes also told Mr McCreevy during his visit to Dublin on Tuesday that next month he will present a document on how to improve the eurozone’s economic governance.

This will cover three elements: how better to combine discipline with growth and consider a new balance between the broad economic policy guidelines and the Pact; sustainability and a new position on debt levels; and how to enhance the authority of the Commission over economic policy surveillance.

Mr McCreevy’s view is that there will not be the political will among the member states to contemplate change to the Pact at this stage following unsuccessful efforts last year.

“I detect a feeling by the member states that they would like a period of reflection now and it would not be good to discuss changes to the pact at this time. It was not possible to progress this after a period of 12 months’ deliberations on the foot of a very good Commission document.”

Changes suggested by Mr Solbes would require accord by heads of state when they meet in March or June. March would be too early and, at the June summit, the Commission will be about to end their term.