Schroeder Urges Looser Eurozone Rules

by Ulrika Lomas, for LawAndTax-News.com, Brussels

19 January 2005

Writing in the Financial Times ahead of Tuesday's Ecofin meeting, German Chancellor Gerhard Schroeder once again called for the terms of the Stability and Growth Pact, which governs the economy of eurozone countries, to be loosened.

Mr Schroeder put forward several proposals for the planned reform of the Pact, set to be agreed in March.

Among these were the suggestions that governments undertaking structural reforms should not be punished if this causes them to overshoot the 3% of GDP deficit ceiling, that eurozone members experiencing periods of economic stagnation should be treated more leniently, and that special financial burdens affecting certain member states should be taken into consideration.

"The stability pact will work better if intervention by European institutions in the budgetary sovereignty of national parliaments is only permitted under very limited conditions," the German Chancellor wrote, continuing:

"Only if their competences are respected will the member states be willing to align their policies more consistently with the economic goals of the EU."

However, even within his own country, Mr Schroeder's proposals have been met with anger.

According to reports, the Bundesbank and the German business federation both expressed strong opposition to the Chancellor's plans, with the former suggesting that they would result in a "de facto" abandonment of the rules of the Stability and Growth Pact.

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