Duitsland dreigt Stabiliteits- en Groeipact te overschrijden (en)

According to reports in the German media, the European Commission will next Tuesday recommend compulsory economic measures that Berlin will have to enforce if it wishes to avoid billions of euro in fines.

Germany has breached the rules underpinning the euro - known as the Stability and Growth Pact - for two successive years and is certain to do so again next year.

These rules state that a country's budget deficit - its tax receipts minus its public spending - must be less than three percent of its GDP (gross domestic product).

But Berlin's deficit is set to be 3.9 percent next year, so Brussels will order Germany to take additional measures to reduce the figure.

If these additional measures are not taken, the next step is that the Commission can impose fines on Germany - which could run to billions of euro.

German fury

The reports have caused fury in Germany. The German finance minister, Hans Eichel, believes that Berlin is co-operating with the Commission and therefore should not have additional measures imposed upon it.

But the Commission wants to see Germany's deficit below the three percent ceiling by 2005 at the latest.

There is a "99 percent" chance of Brussels calling for extra economic measures, according to Commission sources quoted in the Süddeutsche Zeitung.

"Does Solbes want us to cut child benefits or raise income tax?", asked an expert, referring to the measures Germany might have to take.

Storm clouds ahead

This new revelation adds to the potential for fireworks at the next meeting of finance ministers, scheduled for the 24-25 November.

Ministers already postponed a decision on what to do with France - which is also in breach of the rules - and now they have the German problem on the table, too.

In practice, Germany and France have enough support amongst fellow member states to block any proposals from the Commission. It is unlikely that a vote would lead to having fines imposed upon them.

But smaller countries - especially Austria and the Netherlands - as well as the European Central Bank (ECB) warn that any political steps to avoid these economic measures would undermine the credibility of the rules and hence the euro itself.