Date of release : 08-03-2005

Policy area : Economic and Financial Affairs Economic and Financial Affairs

Event : Economic and Financial Affairs Council

The meetings of the Eurogroup and the "Economic and Financial Affairs" Council, held on 7 and 8 March 2005 in Brussels, did not result in an agreement on the reform of the stability and growth pact.

Under the chairmanship of the Prime Minister, Minister for Finance, Jean-Claude Juncker, the ministers of Finance of the 12 member countries of the Euro Zone were forced to the conclusion that after nine and a half hours of debate, an agreement at this stage was not possible. The meeting of the "Economic and Financial Affairs" Council the next day confirmed the feeling that major difficulties continue, mainly because of the reservations expressed by non-member countries of the Euro Zone regarding the advisability per se of reforming the pact.

The delegations approved many of the points in the compromise text prepared by the Luxembourg Presidency, especially with regard to the need for the Member States to "put forward more effort (in budgetary consolidation) in economic upturns in order to have greater flexibility in times of economic downturns."

Mr Juncker then announced that the Eurogroup will meet again on 20 March in Brussels, two days before the European Council Summit of EU Heads of State and Government. A meeting of the enlarged Eurogroup, to be attended by the 25 Finance ministers of the Member states of the European Union, is scheduled for the same day.

Speaking to the press at the end of the Council meeting, Prime Minister Jean-Claude Juncker remarked that in the Eurogroup there was still "a problem of substance to be resolved," namely whether or not a list of relevant factors should be included in the qualitative assessment of a deficit that is slightly above the 3% reference value and "if there should be a list, what the scope of this list should be." "In any event," the President of the Eurogroup and current President of the "Economic and Financial Affairs" Council went on to say, "12 of us agree that a deficit over 3% will not be recognised as an excessive deficit, and that going above 3% must be temporary, exceptional and close to the reference value, in other words, 3%."

Jean-Claude Juncker said that he has not lost hope of "reaching an agreement inside the Eurogroup" but that it is difficult for him to see "how we can get the other Member States to observe the agreement we may reach within the Eurogroup, even if this agreement continues to be difficult."

"We have the option of not reforming the pact" said Jean-Claude Juncker, "and I would not rule that out." Although the current pact and its implementation do not work well, the head of the Government of Luxembourg said that he has "no desire to replace a pact that works poorly with a pact that gives the impression of working but that will not work later." And, in conclusion: "Those who believe that autobiographic reasons would push me to want an amended and revised pact at any price are seriously mistaken. I am more familiar than some other people with the pact as it now stands. If I were asked to behave irresponsibly, if the governments continue to believe that Europe exists so that they can have their national viewpoints prevail – I am saying this for the advocates of increased stability and for the advocates of increased flexibility – I will not be the one who lets them have their way."

Despite his "reasonable optimism" regarding the chances of reaching an agreement in the next 12 days, Jean-Claude Juncker emphasized that the idea of making "a reform and a compromise to have a compromise and a reform" must be dismissed. In closing he said: "therefore, I am withholding my judgement until the final autopsy."