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Monday, November 17, 2003

Trouble At Mill

According to the Financial Times, the European Commission is heading for a confrontation with the German government. It is expected to call today for Germany to make €6bn of additional savings from its 2004 budget. Eichel's response was not long in coming. Things are really starting to hot up, and even more so if the anticipated recovery doesn't materialise in quite the way everyone is expecting.

Hans Eichel, German finance minister, on Friday criticised the European Commission's stance on the European Union's stability pact as "devoid of all logic", in a stinging attack set to further strain Berlin's relations with Brussels.The reproach came after the Commission said it would consider new measures requiring Germany to cut its budget deficit next Tuesday.

In a guest article for the Financial Times due to appear on Monday, Mr Eichel hit back at Brussels, arguing that the Commission was wrong to interpret the stability pact that underpins the euro as "a purely mechanical procedure". Mr Eichel suggested that the Commission had provoked "avoidable and needless conflicts" with EU members over the pact. He said it was "unacceptable for members states which conform to the measures agreed in the Ecofin (the EU finance ministers' meeting) to be subjected to additional procedures and sanctions. This sort of discipline is devoid of all logic and contradicts the spirit of the pact". Germany admitted it would exceed the stability pact's 3 per cent budget deficit threshold for a third year in succession next year. Mr Eichel argued that Germany was doing its best in implementing economic reforms to reduce its deficit, and should not be penalised.
Source: Financial Times

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