DISCUSSIONS at the informal meeting of EU economic and finance (Ecofin) ministers in Dublin this weekend are likely to centre around the stability pact. The stability pact, first proposed by German Finance Minister, Mr Theo Waigel, will ensure that European governments maintain a tight grip on fiscal policies after monetary union.
This was the area where there was most disagreement among the various ministers and central bankers, Minister for Finance Mr Quinn said yesterday. It was also the area which most concerns Ireland, he added.
Despite suggestions from Germany yesterday that substantial agreement could be made on the pact in Dublin, Mr Quinn insisted there would be no earth shattering announcements at the weekend.
"It is just a work in progress meeting," he said. Formal announcements will not be made until the Dublin summit meeting in December.
While the broad principles of a "stability pact" have been agreed, three key points which will have a major impact on how flexible the system is in practice remain unresolved.
The stability pact provides for sanctions against countries which allow their budget deficits to rise above 3 per cent of GDP and fail to take corrective action within a set time.
The sanctions will consist of an obligation to make a non-interest bearing deposit, which will later become a fine if the problem persists.
The points on which an accord has yet to be found are
. the length of the grace period allowed for countries to correct excessive deficits
. the level of the sanctions
. the definition of exceptional circumstances which will allow countries to escape sanctions.
Germany, anxious to reassure its citizens that the euro will be as stable a currency as the deutschmark, is pushing for the most restrictive system its partners will accept.
The Commission is keen to maintain a clause whereby countries could escape sanctions if they are subject to a severe recession. Germany considers this formula too flexible and argues it should only apply if a country's economy has contracted at an annual rate of 2 per cent for four consecutive quarters.
Belgium wants the "exceptional circumstances" to be clearly defined but others, including Ireland, argue that it is impossible to legislate in advance for events such as the current beef crisis, which is likely to have a significant impact on British government finances.
The informal conference will also concentrate on two other areas. The first area will be the relationship between those who are in and those who are out of the single currency. The Irish delegation is particularly concerned about this area, which it hopes will ensure a stable exchange rate between currencies inside the unions and those likely to be on the outside, for example sterling.
The conference will also be discussing the legal framework for the euro. The European Monetary Institute, the Monetary Committee and the Commission will all be presenting papers.
