Stability Pact "at risk of being buried under its own exceptions"

4.14.13pm GMT Tue 18th Jan 2005

"The Stability and Growth Pact is at risk of being buried under a mountain of its own exceptions" declared Graham Watson, leader of the Alliance of Liberals and Democrats for Europe following today's Ecofin Council, "The decision to avoid pursuing France and Germany is the result of a political deal that leaves the European economy prey to recurrent public sector deficits." Europe needs a tough Stability Pact, respected by all member states with clear rules that apply to all Members equally. At the moment it is little more than a Gentleman's agreement, without the gentlemen," he added.

"The current reflections of Europe's finance ministers must address the root cause of the problem'" added Wolf Klinz, (German Liberal MEP) "It is right to rebalance the obsession with the 3% annual deficit figure with greater attention to the overall debt ratio but Member States have to build up sufficient reserves in the good times to have room for manoeuvre when times are tough. Hans Eichel might do well to recall that the principle of the Pact had its origins in the Old Testament where Joseph carefully managed Egyptian grain surpluses during 7 years of bumper crops, providing sufficient reserves for the following 7 years of drought," he recalled. "The Pact was launched as a guarantee of the stability of the new Single Currency. If it is ignored with impunity, then ultimately it can undermine the credibility of the currency too."

The ALDE economic and monetary affairs team will shortly be outlining its own proposals for reforming the Pact as part of the current public debate.