The European Central Bank said today that the European Union's Stability and Growth Pact was indispensable for the single currency zone because it supported stable prices and fostered confidence.
The pact, which outlaws deficits above 3 per cent of GDP and calls for the public books to be balanced over the medium term, was openly ridiculed by European Commission President Mr Romano Prodi last week, who called it "stupid".
"Problems have arisen not because the rules are inflexible, but as a result of some countries' unwillingness to honour their commitments to respect the rules," the ECB said.
Economists fear the ECB may postpone interest rate cuts, despite a faltering recovery in the euro zone, in retaliation for political meddling with the pact that has degenerated into a public debate on its future.
The pact rules are already being tested by the euro zone's heavyweights. Germany, which authored the pact, announced that it had broken the deficit ceiling this year, and France and Italy are delaying a move to a balanced budget.