No deal yet on EU stability pact reforms

EU finance ministers have failed to reach a deal on reforming the beleaguered stability and growth pact - the rules which underpin the euro - following two days of discussions at the Economic and Finance Ministers Council in Brussels.

Parliamentary Secretary Tonio Fenech told The Times following the meeting that ministers were unable to agree on reforms to the pact, although there had been a convergence of positions by certain member states.

The decisions have been put off to March 20, when the issue will be discussed again at a special meeting ahead of the EU summit which takes place in Brussels two days later.

Under the pact, EU members must keep public deficits below three per cent and public debt under 60 per cent of GDP.

Malta reiterated its position in support of the Commission's proposals, which were described by Mr Fenech as "reaching a reasonable compromise".

Mr Fenech said the proposed reforms suggest that before taking any decision against a member state for having excessive deficits and debt, the EU will have to take into consideration the particular economic situation of that country. Certain aspects of economic structural reforms would be considered, such as changes in the pension and health systems.

This, he said, was important for Malta as the country was facing economic restructuring on all fronts. At the same time he stressed that the government intended to stay within the stability and growth pact criteria, because it believed that this was the way forward to having a sound economy.

Under the proposed new measures, countries with long periods of slow growth would be allowed to break the budget ceiling. In a bid to avoid budget disputes between member states, the proposals include changes to the time period countries are given to reduce their deficits depending on the individual economic factors of each country.

During yesterday's council meeting, France and Germany pushed for more flexibility in the pact than that suggested by the Commission, raising concerns in smaller countries such as Austria and the Netherlands, which are reluctant to see the rules of the pact relaxed.

Luxembourg, the current head of the EU's rotating presidency, put forward compromise proposals designed to address French and German concerns, in particular allowing mitigating circumstances to be taken into account before launching excessive deficit procedures.

However, at the end of the discussion it was decided that the positions of various member states were still far apart and that a special meeting would be held.

At the same meeting, the Council decided to start excessive deficit procedures against Hungary for not sticking to its original plan to reduce the deficit. Hungary will now have to propose a new strategy in a few weeks' time, indicating what concrete measures it will be taking to correct the situation.

Mr Fenech said this episode confirmed how important it was for Malta to follow its budget commitments in order not to face similar consequences. The reduction of the deficit, he said, remained one of the main goals on the government's economic agenda.