GERMANY insists a strict stability pact be in place to ensure fiscal discipline under the European Union's planned single currency and will pull out of attempts to develop one if others try to dilute its impact, according to Mr Juergen Stark, the German finance ministry's top civil servant.

In an interview in today's edition of the Handjsblatt newspaper, Mr Stark was quoted as saying that Germany would only join the launch after 1999 of the euro currency if a clear system was in place to impose sanctions on states who fail to keep their finances in order.

If there were moves to water down the pact. Germany would withdraw from negotiations on the agreement until a decision is reached in early 1998 on which countries qualify to join the EU states to launch the euro in 1999 Mr Stark said.

It would then try to hammer out a stability deal with those countries alone. But Mr Stark also expressed confidence that a tough stability pact could be agreed.

The idea of a stability pact, the brainchild of the German Finance Minister, Mr Theo Waigel, has been accepted in broad terms in the EU but there has been no detailed agreement yet on how it will work.

A draft proposal put forward by the European Commission earlier this month suggested that countries running a budget deficit higher than the 3 per cent of GDP permitted by the Maastricht Treaty may face sanctions.

But a meeting of EU finance ministers in Dublin in September left open questions of the size of the sanctions or fines and of precise definitions for the "exceptional and temporary" circumstances which would allow a country to acceptably exceed specified budget deficit limits.