Germany and Austria sounded the death knell for the EU Stability and Growth Pact in its current form yesterday, calling on the European Commission to propose changes to the fiscal rulebook rather than defend it in court.
Significantly the move was led by the Austrian Chancellor, Mr Wolfgang Schüssel.
Austria was one of four EU countries that voted this week against Berlin and Paris escaping sanctions under the pact for breaking the EU's limit on budget deficits.
"It would be a good thing if instead of just leaving things the way they are, we had the courage to discuss things and perhaps come up with an initiative...for an improvement of this Stability and Growth Pact," he said at a news conference with his German counterpart Mr Gerhard Schröder in Berlin.
French budget minister, Mr Alain Lambert, said the pact's deficit rules should be applied over the duration of an economic cycle rather than on a yearly basis, echoing calls already made by the British Chancellor of the Exchequer Mr Gordon Brown who uses a similar "golden rule" to guide Britain's public finances.
Writing in yesterday's Financial Times, Belgian economist Mr Paul De Grauwe suggested the rules could be tailored according to an individual's country's level of public debt. - (Reuters)
