22 November 2001, 11:06 EU's Solbes says expects no breach of pacts in German 2002 budget deficit
FRANKFURT (AFX) - EU economic and monetary affairs commissioner
Pedro Solbes said he will be closely watching Germany's budget
situation next year, but is confident it will not break the rules of
the stability and growth pact.
Speaking to journalists here last night, Solbes said Germany is
expected by the EU to post a deficit of 2.7 pct of GDP next year, but
this is "not a disruption" of the stability and growth pact.
"This is not a good figure ... it is at the upper limit ... but it
is not 3 pct," Solbes said, referring to the stipulation that deficits
should not normally exceed 3 pct of GDP.
He said the EU will not take any action against Germany over the
high budget deficit, so long as it is no worse than the EU's
projections.
"We do not consider that we need to do anything if the (deficit)
figures are in line with our forecasts. We will monitor the situation
-- if things change we will see."
Solbes said it is "too early" to say what action Germany would face
if its deficit went beyond the 3 pct level next year, but indicated it
would not be excused from the rules of the pact.
"The procedures that have been established in the stability and
growth pact are perfectly clear on this issue," he said.
Solbes also confirmed the EU is paying closer attention to data for
budget deficits which are adjusted for cyclical effects, especially
during the current slowdown.
However he denied this means the nominal budget deficit targets no
longer form the basis of the pact.
"It means that once the weakness is over, the former situation will
reassert itself," he said.
The EU is confident that the cyclically adjusted budget positions
will not be any worse than the year before, Solbes said.
He said the budgetary discipline of EU governments gave the
European Central Bank "sufficient room" to cut interest rates earlier
this month. The bank had maintained an "adequate" monetary policy this
year, Solbes said.
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