COMMENT

by MONITOR
THE truth of the old adage that “rules are made to be broken” has seldom been more convincingly demonstrated than by the decision of the European Union finance ministers to allow France and Germany to breach the EU's Stability and Growth Pact without penalty. Nor has the truth of the old adage “if you scratch my back I'll scratch yours” ever been more convincingly demonstrated than by the readiness of Britain and Italy to support France and Germany in their fight to avoid financial sanctions for their disregard of the Pact. Ranged against this cosy alliance of the “big five” of the EU were many smaller member states, in particular Belgium, Finland, the Netherlands and Sweden, and the European Commission itself whose commissioner for economic and monetary affairs, Pedro Solbes, said that the Commission “deeply regrets that these proposals are not following the spirit and the rules”. The Stability and Growth Pact is a bedrock of the European Union; it is designed to ensure that the economies of the member states remain broadly in line and stipulates that no country's budget deficit should exceed three per cent of Gross Domestic Product. The Pact provides for heavy fines to be imposed on any offending country. France and Germany have been in breach of the agreement for several years and refused to meet an earlier demand by the Commission that they should give guarantees of correcting the situation. The decision of the EU finance ministers, reached at an all-night negotiating session, enables France and Germany to continue their present fiscal policies with impunity. If the rules of something as fundamental as the Stability and Growth Pact can be bent it is difficult to think what EU commitments have to be adhered to.