Meeting for the first time since the introduction of the euro, the finance ministers of the 12 nation Eurogroup have backed the fiscal policies of Germany and Portugal, despite soaring budget deficits in both countries.
Close shave: Hans Eichel avoids humiliation - for now at least
There was "overall consensus" that the fiscal policies of the two countries is correct, the Spanish Economics minister Rodrigo Rato said at the close of the meeting in Brussels on Monday.
The ministers had concluded that the worsening of the fiscal deficits reflected changes in the business cycle. "We are not looking for any changes in tax policy," Rato said.
Both countries had been expected to be sent "early warnings" by the European Commission, as required by the rules of the stability pact. Germany caused particular concern as its budget deficit is getting unnervingly close to the 3 percent budget deficit ceiling laid down in the rules of the pact.
"Of course the German budget is nowhere near where it should be", Germany’s finance minister Hans Eichel said just after the meeting. But his policies had not been criticised "by anyone at the meeting – not even the Commission", Eichel said.
The yellow card from Brussels would have humiliated the German government as Germany had insisted on writing the very fiscal restraints into the plans it is now in danger of breaking.
The Commission had made clear before the meeting that it did not intend to criticise the Germans. At the same time, however, rumours circulated in Brussels that Europe’s economic powerhouse was getting worryingly close to the 3 percent ceiling and that the Commission would have to act.
Eichel stressed that Germany would not slip further towards the 3 percent figure adding that Germany did not need a formal warning.
But the Commission’s move not to act now has only given Eichel a temporary breather. The Commission is due to pass judgement on the stability pacts of Germany and Portugal on January 30.