Commission’s reputation put on line over ‘stupid pact’ ruling

By Martin Banks in Strasbourg and Peter Chapman in Brussels

Date: 15/01/04

THE European Commission is risking its reputation on a court ruling over the Stability and Growth Pact - the budget accord once described by Romano Prodi as "stupid". The EU executive wants the European Court of Justice (ECJ) to issue a "fast-track ruling", usually issued within six months, upholding its powers to police errant governments, such as France and Germany, which fail to toe the line by keeping their budget deficits under 3% of national income.

This week's move follows a decision by finance ministers in November to reject disciplinary sanctions against Germany and France - a move that could have led to hefty fines. Ministers effectively threw the pact in the bin - outraging the Commission, which saw it as a direct challenge to its authority and role as guardian of the European Union's treaties.

Prodi, in Strasbourg for the first plenary session of the year, said: "I firmly believe we are a Community of law; such changes need to be debated and decided through clear Community procedures."

Pedro Solbes, the commissioner for economic and monetary affairs, added that Ecofin's position "changes the nature of the budgetary surveillance and it is therefore useful to have the Court's ruling in order to clarify surveillance in the future". The pair insisted that the decision had more to do with regaining the Commission's role, rather than a dispute with ministers over actual budget policy.

Despite the challenge, Prodi and Solbes revealed they would also unveil fresh proposals next month aimed at injecting more flexibility into the way the pact is applied. The Commission president has often criticized the rigidity of the budget rules, drawn-up ahead of the launch of the single currency at the behest of Germany.

Some of his colleagues, including UK, French and German commissioners, questioned the wisdom of the court move - although they did not force a vote on the issue. German Finance Minister Hans Eichel told reporters "cooperation rather than confrontation between the organs of the EU" would have been better, "especially given the challenges facing the EU in the near future".

Irish Finance Minister Charlie McCreevy told RTE radio the challenge may provide legal certainty for the future - although he also warned that it could throw Commission powers in many other areas into doubt.

European Parliament President Pat Cox was also critical, saying: "Policymaking requires judgement and the primacy of politics. Bringing legal proceedings may illuminate the law but it will not help the decision-making process. The decision facing finance ministers last November was whether to take action against one member state emerging from a recession and another not firing on all cylinders. Rules are rules and, of course, one should try to make sure the rules apply equally. But when you are applying rules you need to apply common sense.

"The bigger picture is the need to revise the pact's rules so that in a low growth environment, where you have public deficits, we can maintain a stability culture without stifling fragile economic growth. Reform of the pact's rules will require considerable political investment and cooperation from all EU governments. My concern is that any legal wrangling does not drain vital political energy away from the reform process at a critical time."MEPs were also divided. Luxembourg deputy Robert Goebbels, a vice-president of the PES group, attacked the decision, saying: "It is not for judges in the ECJ to decide the budgetary policy of EU member states. This decision risks bringing about a kind of "government of judges". The pact is for the political domain and no other. Ironically, we are now witnessing the Prodi Commission trying to safeguard regulations described by Prodi himself as 'stupid'."

Political group leaders in the European Parliament gave a mixed response. Hans-Gert Pöttering, leader of the biggest group, the European People's Party, welcomed the move, saying: "Of course it is right for the Commission to bring an action in the ECJ. It is merely trying to defend the principles underpinning the pact."

Othmar Karas, EPP spokesman on economic affairs, added: "The EU is based on the rule of law and can only work properly if law remains the basis for all decisions."

Liberal group leader Graham Watson said: "Not taking legal action would mean tacitly accepting the decision of ministers to forget their responsibilities. This is a high-risk strategy but one that is necessary and could reap high rewards. A judgement by the Court could help re-establish the pact's credibility and the rule of law in the EU."

UK Conservative deputy Theresa Villiers, her party's finance spokesman, said: "The question is whether the pact can return from the grave. Solbes is clearly trying to bring it back to life but the member states don't look as if they are going to take any more notice of him than they did last time." Leader - Page 9

The European Commission wants the European Court of Justice to issue a 'fast-track ruling' over a decision by European Finance Ministers in November 2003 to suspend the threat of fines on France and Germany for breaching the terms of the Stability and Growth Pact. The Commission sees the Minister's action as a direct challenge to its authority.

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