Germany has managed to avoid a formal warning from Brussels for getting close to Euro-zone spending limits. Great. Now, can Germany keep its new promises?
Living on borrowed time
The finance minister appeared from the meeting with a smile on his face. Hans Eichel had brought some heavy political clout to bear on the European Commission to avoid a formal warning.
And he got what he wanted from the two days of talks in Brussels by promising Germany would strive to wipe out its deficit by 2004, despite the slip caused by the current global economic slowdown.
The 15 EU ministers issued unanimously approved statements in which they took note of renewed German commitments to keep a lid on spending and reduce the deficit, plus a pledge to not breach the sacrosanct three percent mark.
It amounts to a slap in the face of the Stability and Growth Pact, according to the political opposition.
Chancellor Gerhard Schröder’s Bavarian challenger Edmund Stoiber has demanded that Eichel "lay his cards on the table." Will the "horse trade in Brussels" lead to higher taxes at home, he asked in an interview with the popular tabloid Bild Zeitung.
On the economic front, the prospect of balancing the budget by 2004 is very unlikely, according to Dieter Vesper of the German Economic Institute.
On the other hand, the European Central Bank, guardian of the euro currency, gave its blessing to the deals struck in Brussels.
An ECB spokesman said that ECB boss Wim Duisenberg, who was at the Brussels talks, backed the deal.
But groans of discontentment have been voiced across the continent. Political interference in economic issues looks desperately bad in the eyes of the money markets, critics say, which have driven the euro down since its introduction three years ago.
Eichel himself, however, said he saw no risks to the euro's credibility and exchange rate after the deal. "The euro exchange rate shows such claims are rubbish," he told reporters.