German Finance Minister Hans Eichel said yesterday that no European Union country was likely to meet its 2001 budget objectives and that a debate on the degree to which governments could overshoot these goals was ongoing.

Speaking to fellow members of Germany's Social Democratic party (SPD), Mr Eichel again denied he had questioned the budgetary rules underpinning the euro when he recently suggested spending targets could be planned more easily than budget deficits.

But Mr Eichel and others at the SPD conference said the "under the covers" debate in Europe was about how much countries such as Germany, France and Italy could allow their budget deficits rise in the short term in order to cushion the impact of slower growth.

"As this year will show, the objectives set at the beginning of the year - the deficit targets - of all countries in the European Union and the euro zone will not be reached, although those with surpluses are in a better position," Mr Eichel said.

"That must not lead to the credibility of the whole consolidation strategy being called into question.

"That is why I suggested that alongside yearly goals we needed medium-term goals for spending. I did not mean anything more than that," he said.

Mr Eichel added that finance ministers had to "send the right signals to the European Central Bank" by not questioning the EU's Stability and Growth Pact, a law that obliges EU governments to aim for balanced budgets over an unspecified "medium term".

Germany is aiming to balance its budget by 2006, but Mr Eichel has said that achieving the country's 2001 deficit goal of 1.5 per cent of gross domestic product (GDP) will be difficult given the global economic slowdown.

The finance ministry said in April that a budget deficit of 1.7 per cent was more likely, arguing this would still be compatible with the 1.5 per cent goal.

Germany's central bank said during August that the deficit could exceed two per cent.