EU Finance Ministers Spar with Commission

BRUSSELS -- Barely a week after European Monetary Affairs Commissioner Pedro Solbes announced he would file a legal complaint at the European Court of Justice against euro zone members, both plaintiffs and defendants came together for a routine meeting on Monday night.

In November, the finance ministers on the European Council effectively suspended the Stability Pact in order to prevent the Commission from imposing stiff penalties on France and Germany. The move prompted Solbes' suit at the Luxembourg high court.

In his consultations with the so-called Euro Group, which includes the finance ministers of all 12 euro zone countries, Solbes once again repeated his grounds for the unprecedented lawsuit. But Solbes was met with frosty resistance.

'Little support'

"There was little support among the ministers for the Commission’s decision to seek a ruling from the European Court of Justice," said Irish Finance Minister Charlie McCreevy.

Austrian Finance Minister Karl-Heinz Grasser, who in the past has sided with Solbes, rejected the Commission’s suit. Even if the Commission were to win it’s case, he said, nothing would change because it wouldn’t have any way of making sure the judgement was enforced.

On the other hand, "if the Commission loses," Grasser said," it could create the impression that Germany and France acted properly, which certainly isn’t the case. In our opinion, it’s a misguided deficit policy that’s certainly damaging for growth and employment. In that regard, we’ve fought side by side with the Commission and for that reason I regret that the Commission is now sending out a false political signal instead of increasing the political pressure on Germany and France to continue with their (budget) consolidation."

This year, Germany and France will breach the budget deficit limit of 3 percent of gross domestic product established in the Stability and Growth Pact for the third year in a row. But German Finance Minister Hans Eichel said Monday he still found Solbes’ decision to sue to be "incomprehensible."

Speaking at the meeting, he said: "Because the economy is doing better, the mood is, in general, good. I don’t think there’s anything else to say really."

Despite the refusal of the council to accept his decision to sue, Solbes on Monday seemed unmoved.

"First, I don’t feel attacked," he said. "Second, I have acted consistently with my position, which is that the pact that was agreed to must be respected."

Germany's Eichel, meanwhile, also rejected Solbes’ plan to call for changes to the stability pact next month. The new regulations would force member states to adhere to more disciplined budgets during periods of economic upswings.

Concern over weak dollar

In a separate area of discussion Monday, the ministers also broached the issue of the euro’s high exchange rate against the dollar.

"In the present circumstances, we’ve stressed stability and we’re concerned about excessive exchange rate moves," the ministers said in a statement. "We will continue to monitor the situation very closely and conduct policies supporting economic recovery in a stable macroeconomic environment."

The European finance ministers are also seeking to develop a common position for their G7 meeting with the United States in Florida early next month. Several finance experts as well as the president of the European Central Bank, Jean-Claude Trichet, have expressed concern about the weakness of the dollar – even though the dollar appeared to recover against the euro slightly during the past week.

Another point of contention between the European Commission and the finance ministers is a call by the Commission to increase the EU’s budget by 1.24 percent of gross domestic product after 2007. Germany and five other EU net payers have rejected the proposal, which would require them to pay billions more to Brussels. German Finance Minister Eichel has said he would like to cap the EU budget at 1 percent of gross domestic product, which would create an overall budget of about €100 billion.