Patstelling verlamt overleg over hervorming Stabiliteitspact (en)

EUOBSERVER / BRUSSELS - Clearly exasperated by the lack of agreement on how best to reform the rules underpinning the euro, Luxembourg's Prime Minister Jean-Claude Juncker has said he does not rule out leaving the rules as they are and scrapping the attempted reforms.

Speaking after a marathon session of talks with other finance ministers, Mr Juncker said, "I am now beginning to seriously consider the option of not changing the pact at all. We are not excluding the scenario of leaving the pact as it is. That is now a distinct possibility".

Although he remained "optimistic" about reaching an agreement amongst the 12 euro countries, he said, "I can't really see how we can possibly bring the non euro zone states on board".

A consensus on reform must be agreed by all 25 member states.

Economics and Monetary Affairs commissioner Joaquin Almunia echoed these sentiments, saying, "I'm now far from sure that it will be possible to secure a satisfactory solution".

"It would be a mistake to replace a poorly functioning pact with an even worse set of rules", added the Commissioner.

Mr Juncker stressed he was not willing to change the pact into an even worse system for the euro.

"[the pact] is not working very well ... but I am not going to sign up to a solution which boils down to an equally poorly functioning pact later on", he said.

All relevant factors

The only sticking point remaining in the row is the list of factors that should be taken into consideration when deciding whether a member state should be punished for having a deficit that breaks the maximum permitted ceiling of three percent of gross domestic product (GDP).

Mr Juncker circulated a draft proposal to his colleagues, but admitted that they were "not universally well received".

The proposals contained several concessions to Germany's position, including a loosely-worded clause hinting that the cost of German reunification could be taken into account when calculating deficits.

But Germany is still unhappy with the proposals and many smaller member states - especially Austria - feel the proposals make the pact too flexible.

In a thinly veiled attack on Germany, Mr Juncker said, "I am not prepared to go to inordinate length to amend the pact. People who think that I am will be severely mistaken".

"If national governments continue to believe that Europe is just another arena to express their purely national political agendas by claiming for more and more undesirable flexibility, I'm not going to be used to accommodate those views and ambitions", he added.

However, he emphasised that "this is not a purely German problem".

Old Europe vs New Europe

In response to questions, Mr Juncker hinted that a split had also emerged between "old" member states and "new" member states, with the new member states reluctant to introduce too much leeway into a reformed pact.

"Many of the new member states want to avoid absolutely every change to the pact that could weaken the credibility and stability of the single currency", he said.

"They expressed their view with a vehemence that amazed me".

On the other side of this argument, Mr Juncker explained were "those who want to push flexibility as far as they possibly can".

Last chance saloon

A new meeting has been convened for 20 March, just two days before EU leaders meet to take over the dossier, but the mood over the stability pact is the blackest it has been since it was effectively destroyed by France and Germany in November 2003.

German Chancellor Gerhard Schröder will meet Mr Juncker tonight (8 March) in Luxembourg to emphasise the German position but the Luxembourg Prime Minister has shown that he is in no mood to play games.