Pact Ruling Euro Nations Is Stupid, Says Prodi
Castle, Stephen, The Independent (London, England)
ROMANO PRODI, the President of the European Commission, poured salt into one of the EU's most open wounds yesterday, by describing the economic rules that govern nations signed up to the European single currency as "imperfect" and "stupid".
In what was regarded as a clear gaffe, Mr Prodi voiced outspoken criticism of the so-called Stability and Growth Pact, which he described as necessary but in need of flexible interpretation.
His comments seem designed to offer an olive branch to France which has waged a lengthy campaign for countries to have more freedom to promote growth during economic slowdowns. But such blunt language from the man responsible for implementing the rules stirred a divisive debate and raised new questions about the credibility of the pact.
As Mr Prodi's intervention was assessed yesterday the euro fell to a one-month low against the US dollar.
The 12 nations using the single currency signed up to the pact ahead of the euro's launch in 1999 to demonstrate their commitment to control finances in return for low interest rates. Those countries which breach a ceiling on budget deficits of three per cent of gross domestic product face censure and heavy fines.
But with the economic slowdown biting hard the pact has been strained to breaking point. In recent months Germany, France and Italy, which together account for three-quarters of the economy of the euro zone, have been campaigning for a reworking of the rules. Countries which are close to balancing their budgets, ranging from Spain to Finland, insist the rules should not be diluted.
Portugal has already been criticised for exceeding the ceiling last year when its deficit climbed to 4.1 per cent. The Commission has given France, Germany and Italy more time to reduce deficits.
Mr Prodi's words could scarcely have come at a more delicate time, amid …
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Publication information: Article title: Pact Ruling Euro Nations Is Stupid, Says Prodi. Contributors: Castle, Stephen - Author. Newspaper title: The Independent (London, England). Publication date: October 18, 2002. Page number: 9. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.
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