February 14, 2002	Thursday	Zilhaj 1, 1422

BRUSSELS, Feb 13: European Union finance ministers formally ended rebuke procedures on Germany’s widening budget deficit on Tuesday saying their skillfully-forged political deal would not hurt the euro.

Allegations that the single European currency was in for more trouble on forex markets were “pure nonsense,” said triumphant German Finance Minister Hans Eichel.

A unanimous decision by the 15 EU ministers against sending Berlin an early warning letter had helped “preserve the credibility” of the bloc’s 1997 growth and stability pact, Eichel insisted.

But the face-saving deal allowing Berlin to wriggle out of an official EU reprimand was immediately thrashed by German opposition leaders and European monetary experts as a sign of European governments’ failure to stand up to Berlin’s bullying.

Ex-German finance minister Theo Waigel slammed the German government for putting pressure on the European Union, saying Berlin had sent a “disastrous signal for the future.”

Waigel, an architect of the stability pact which prevents eurozone governments from overspending, said German Chancellor Gerhard Schroeder’s tough-arm tactics had endangered future use of the pact’s early warning procedure.

The measure is intended to prevent nations overshooting the stability pact’s budget deficit ceiling of 3 per cent of gross domestic product.

European Parliamentarians also lashed out at EU governments for caving in to German pressure.

“This is a bad and damaging decision for Europe and the Euro. It will not contribute to a strengthening of the European Union and its common currency,” said European People’s Party economic spokesman Othmar Karas.

Karas said EU governments had “embarrassed the European Commission as guardian of the Treaties and done a disservice to the stability pact.”

Future “unlawful behaviour” by other EU governments was now inevitable, said Karas.

But EU Monetary Affairs Commissioner Pedro Solbes who called for an early warning for Germany said he was satisfied Berlin would not breach the 3 per cent budget deficit ceiling.

Germany had effectively responded to all of the Commission’s concerns at its rising budget deficit, now estimated at 2.7 per cent of GDP, Solbes said.

A statement by EU governments announcing their decision to close the early warning procedure against Germany said Berlin had made a number of key commitments to avert an official reprimand.

Berlin confirmed its “endeavour” to ensure that the 3 per cent of gross domestic product reference value for the general government deficit will not be breached.

Germany also agreed to implement its 2002 budgetary plans “carefully,” avoiding any discretionary measures that could aggravate its budgetary position and “using any budgetary room for manoeuvre to reduce the deficit.”

Germany also confirmed that a “close to balance position will be reached by 2004,” the statement said.

But ministers also recognised that the early warning procedure started by Solbes last month was an “essential part” of the eurozone’s stability and growth pact.

The commission had there “acted in accordance with the provisions of the pact,” the statement insisted.