Finance ministers in pre-summit battle

  • 2003-03-13
  • Jitendra Joshi
BRUSSELS

EU finance ministers struggled March 7 to chart a common path for their hard-pressed economies, just a fortnight before their leaders are to hold a summit overshadowed by the prospect of war against Iraq.

Britain, France and Germany, finding a unity that has so dramatically eluded them over Iraq, tabled proposals to beef up economic coordination in the European Union.

But other members rejected the ideas, scenting a plot by the heavyweight trio to renegotiate the euro zone's Stability and Growth Pact, diplomats said.

The resistance came a day after France became the third euro country to fall afoul of the pact's strict rules on deficit levels.

And Italy torpedoed a hard-fought agreement to prevent tax evasion by EU citizens who bank their money in foreign countries, prompting an angry reaction from Germany.

The finance ministers battled to draft policy papers to submit to their heads of government at the spring summit in Brussels on March 20 and 21.

The EU's Greek presidency wants the summit to focus on the bloc's "Lisbon agenda," agreed on in the Portuguese capital in 2000. The agenda commits the EU to overtake the United States as the world's most competitive economy by 2010.

But the required reforms have made little headway, and growth across the 15-member union is slowing, with fears of war against Iraq and the attendant fallout on oil supplies and economic activity creating a new headache.

The proposals by Britain, France and Germany caused suspicion among other member states that have striven to get their finances in shape. Members agreed, however, on the trio's idea that EU leaders should endorse measures to strengthen the bloc's single market and promote innovation, as well as to hasten structural and labor reforms.

But the bloc rejected proposed language which implied that apart from deficits, more attention should be paid to getting debt levels down and to the "quality of public finances" with a view to boosting growth in line with the Lisbon agenda.

That was taken to mean that EU countries could embark on looser economic policies to spur growth. "We did not come here to reopen debate on the stability pact at the level of heads of state," said a Belgian diplomat.

The finance ministers did adopt proposals to fine-tune implementation of the stability pact. For instance, the document contained milder wording on the pace of debt and deficit reduction, and removed a suggestion that countries with sound public finances, such as Britain, can run small deficits in certain circumstances.

Greek Finance Minister Nikos Christodoulakis said the stability pact emerged from the debate as "a solid point of reference which has to be respected."

But Italy threw another spanner in the works by refusing to back the savings tax accord unless it also won concessions over diesel duties and milk quotas.

"I'm astonished that the Italian delegation brought completely unrelated issues into the discussion," fumed German Finance Minister Hans Eichel.

The finance ministers will now hold another meeting on March 19 in a bid to push through the savings tax accord just before the EU summit.

After years of discussions, the EU finally decided in January on a regime to tax savings hidden by its residents in secret bank accounts in third countries. The package awaits the final go-ahead from Switzerland, the most important of the third parties involved.