EU Commission to challenge budget deal in court

The European Commission decided yesterday to seek a swift court ruling to overturn finance ministers' suspension of EU budget rules for France and Germany.

Instant criticism from Berlin was a foretaste of the political friction the move is expected to provoke at a time when the euro zone's big governments want to retain the power to stimulate growth using fiscal policy.

The EU executive, which is responsible for enforcing the bloc's laws, argued that a court ruling was vital to clarify the disciplinary procedures applied to those who break the EU's deficit limit as Paris and Berlin have done repeatedly.

But German Finance Minister Hans Eichel said the decision to go to the European Court of Justice was unwarranted and the EU would have been better served by a different approach.

"Not least in view of the tasks faced by the European Union in the near future, it would be more helpful for the organs of the European Union to engage in cooperation rather than confrontation," Mr Eichel said in Berlin.

Financial markets showed little reaction to the widely expected Commission decision, and international ratings agency Moody's told Reuters euro zone credit ratings would not be affected by the lawsuit.

Analysts said the tussle between the Commission and member states highlighted the need to rethink the Stability and Growth Pact on budget discipline.

Monetary Affairs Commissioner Pedro Solbes and his supporters argue that Brussels has a duty to uphold the rule of law and avoid a precedent that could legitimise rule-breaking in other areas and ultimately undermine the EU treaty.