OUTLOOK EU finance ministers to agree Germany no longer breaches deficit rule

OUTLOOK EU finance ministers to agree Germany no longer breaches deficit rule

	Published : Mon, 04 Jun 2007 09:38 By : Agencies Print this Story

BRUSSELS (Thomson Fin - EU finance ministers are set to agree tomorrow that Germany is no longer in breach of the stability and growth pact's deficit limit.

At their meeting in Luxembourg, ministers are expected to back the European Commission's recommendation that disciplinary action against the EU's largest economy can now be dropped.

Last year, Germany cut its deficit to 1.9 pct of GDP, well below the pact's 3 pct limit.

'Germany's correction of its deficit is very important for the credibility of the Stability and Growth Pact,' EU economic and monetary affairs commissioner Joaquin Almunia said last month.

'The challenge now is to make use of the good economic recovery to progress further towards a balanced budget and to bring the debt to more sustainable levels', he added.

Ministers are also due to endorse the commission's view that Malta and Greece have brought their deficits in line with the limit.

Equally, they are expected to back a commission recommendation for Cyprus and Malta to adopt the euro as their official currency next January.

At his debut appearance at this evening's gathering of euro zone finance ministers, new French finance minister Jean-Louis Borloo is likely to face questioning over his government's fiscal intentions.

France's new budget minister, Eric Woerth, said shortly after his appointment last month, that he favours a 'pause' in the government's deficit reduction efforts.

But the commission is adamant that all countries must use the current economic recovery to improve their public finances.

Among other agenda items for tomorrow's meeting, ministers are due to consider a raft of tax measures, including controversial proposals to harmonise the way corporate taxes are calculated in the EU.

However, German finance minister Peer Steinbrueck, who has been leading the push for the harmonised corporate tax base along with France, said last week that he does not expect a breakthrough.

'I'm pretty certain that one third of the member states will be against, one third will be indifferent and one third will be in favour,' said Steinbrueck, whose country holds the rotating presidency.

The ministers will also seek to to reach a unanimous agreement on value-added tax for services.

Germany is blocking the package as long as other member states do not allow it to try a new method of tackling VAT fraud that it is advocating along with Austria.

victoria.main@thomson.com

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