The German Chancellor said today Germany and other nations planned to use a clause allowing European Union nations to relax EU budget rules in cases of exceptional circumstance like war.
"We are agreed in Europe that we also need to have the possibility to react to unforeseen events that could materialise as the result of crises in the world," Mr Gerhard Schroeder told the German parliament a week before EU leaders hold their annual economic summit.
"The Stability Pact gives us this possibility and we will use this possibility pro-actively together with our European partners," he added.
"The Stability Pact and our European responsibilities must not be invoked in the current circumstances as an excuse to do nothing. We have to give more impulses to growth," he said.
In his speech, Mr Schroeder unveiled a €15 billion programme of soft loans to stimulate investment by cash-strapped local authorities and homeowners. However, the direct cost to the government's budget will be small, officials have said.
The 1997 Stability and Growth Pact that enforces the EU's three per cent of gross domestic product limit on budget deficits contains a clause to deal with exceptional circumstances.
It says any government's failure to respect the rules shall be considered "exceptional and temporary . . . when resulting from an unusual event outside the control of the member state concerned and which has a major impact on the financial position of the general government, or when resulting from a severe economic downturn".
Germany bust the EU deficit limit last year and France has said it will also exceed it this year.