Duitse minister van Financiën botst met Commissie inzake europact (en)

The conflict between Brussels and Berlin over the euro zone economy is escalating.

On Friday (14 November) German Finance Minister Hans Eichel said ahead of the German SPD Party Congress that Brussels' interpretation of the euro rules was "a purely mechanical procedure".

"The pact is not criminal law, rather a framework. It is not about sinners or even criminals, but acting responsibly economically", he said.

For his part, Pedro Solbes, the EU monetary affairs commissioner, is set to propose on Tuesday (18 November) a cut in Germany's structural budget deficit of 0.8 percent of gross domestic product next year, compared with the 0.6 percent planned by Berlin, reports the Financial Times.

But the German finance minister has already refused to cut the budget further and said it was "out of the question" to expect a 0.8 percent deficit cut next year.

It would mean the German government, which is already troubled by high unemployment and slow growth, would have to make further cuts in its public spending or raise taxes.

"This type of theory has no logic and contradicts the European Union's Stability and Growth Pact", Mr Eichel wrote in a debate contribution to the Frankfurter Allgemeine Zeitung.

The Commission's demands for Germany to cut the budget by 0.8 percent are similar to those made for France, which will also exceed the euro pact's 3 percent of GDP deficit limit for a third successive year in 2004.

The smaller eurozone countries are keen to see the Pact enforced in the same way for big countries as well as for small ones.

The confrontation is expected to come to a head when the French and German deficits are discussed by EU finance ministers next week at the Ecofin Council on 25 November.