France And Germany Unite Against EU Commission On Stability Pact

by Ulrika Lomas, Tax-News.com, Brussels

23 September 2003

The European Commission appears to be losing further ground in the battle to defend the Growth and Stability Pact as France and Germany joined forces to defend their tax policies whilst the IMF called for a relaxation of European fiscal rules into the bargain.

According to the EU Observer, a joint growth strategy paper entitled 'France and Germany together for more growth in Europe' not only strived to justify the recent tax cuts policies enthusiastically pursued by both governments, but attacked the "excessive regulation" that threatened to "de-industrialise" Europe and referred to recent proposals by the Commission as a source for "worry".

Despite repeated assurances by the French and German governments that they are committed to the rules of the pact, the document's proposals for substantial joint infrastructure projects such as a high speed rail link between Paris and Frankfurt via Strasbourg is hardly likely to reassure Commission President Romano Prodi that all is being done to trim budget deficits.

Compounding Prodi's woes, the IMF's chief economist Kenneth Rogstoff waded into the debate at the World Bank/IMF summit in Dubai last week.

Mr. Rogoff said that whilst "I applaud the pact's past success," he added "its interpretation and implementation need to be modified going forward if Europe is to conquer the problems of the present century as well as it dealt with the problems of the past one."

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