A deal to ease the EU's budget discipline rules looked within sight today as euro zone finance ministers met to alter the regime despite central bank fears that they may make it toothless.
"The debate has really moved forward now," one negotiator said of the wrangling over how to revamp the Stability and Growth Pact, undermined by repeated breaches of its budget deficit cap by heavyweight economies Germany and France.
The pact was agree as a sort of guarantee against government profligacy when the euro was launched and is regarded by European Central Bank chief Mr Jean-Claude Trichet as vital.
European Economic and Monetary Affairs Commissioner Mr Joaquin Almunia said he was confident that an agreement would be wrapped up on time for it to be approved at the March EU summit.
"There are still some difficulties but I am confident we will reach agreement in coming weeks," he told a news conference ahead of the evening meeting of ministers.
Diplomats said that, according to the latest proposals drawn up and agreed by senior finance ministry officials, the core rule that member states' budget deficits must not exceed 3 per cent of gross domestic product remains intact.
Calls for certain types of public spending to be excluded from the calculation of deficits have been rejected, they said. France had sought exclusion of its military expenditure, Germany of its contribution to the EU budget, and Italy of public works spending.
However, the project being worked on currently would water down other aspects.
Countries would be excused for breaching the deficit cap for two to three years if this is due to structural reforms of, for instance, public health and pension systems that will bring fiscal savings in the long term, the negotiator said.