Onderhandelingen over hervorming Stabiliteitspact verlopen stroef (en)

EUOBSERVER / BRUSSELS - After some initial success towards reaching agreement on how best to reform the Stability and Growth Pact - the rules underpinning the euro - progress is expected to stall at a meeting of euro zone finance ministers tonight, diplomats have indicated.

Sources close to the discussion believe that many points of disagreement will be pushed back to the next meeting of finance ministers, on 7 and 8 March - the last meeting before EU leaders take up the reins on 22 March.

Holding up progress is the thorny problem of how to punish member states that breach the rules.

At present, euro zone countries whose budget deficits exceed a ceiling of three percent of gross domestic product (GDP) are automatically subject to a disciplinary procedure which can lead to large fines.

But, after damaging clashes between the Commission, which initiates this procedure, and big member states - Germany and France - which have fallen foul of this rule, ministers are now agreed that more flexibility should be introduced into the Pact.

The debate is now centred on what circumstances should be taken into account when assessing whether a member state should be punished or not.

German letters to spark debate

According to Financial Times Deutschland, German finance minister Hans Eichel has attempted to frame the debate by proposing various criteria that should be met before a member state can be subject to the disciplinary procedure.

A member state would have to have made "profound errors" in its economic policy before being subject to sanctions and other factors would be taken into consideration, such as how much a member state spends on research and development.

Furthermore, Germany also wants net contributions to the EU budget to be taken into account, along with the costs it has undergone during reunification.

However, the debate remains very open and is expected to run late into Wednesday night and well into Thursday morning, according to one source.

Mood still good

Despite the disagreements, diplomats remain optimistic that a deal can be thrashed out when EU leaders meet to discuss the issue on 22 March.

"There has been a little bit of narrowing since last time", one source indicated, emphasising that the mood was still positive.

German Chancellor Gerhard Schröder, visiting Brussels yesterday (15 February), expressed the hope that agreement could be reached not only on this topic, but also on how the EU will be funded from 2007-2013 during the first half of this year.

Any other business?

Other issues to be addressed include the controversial tax on airline fuel to boost development aid, improving the accuracy of statistical reporting and the Greek budgetary situation.

Officials say that no agreement will be reached on the airline fuel tax but that Greece will accept that it must drastically reduce its budget deficit or face fines.

Finally, the draft conclusions of the meeting will call for higher statistical standards after Greece was found to have misrepresented the extent of its budgetary difficulties.