Commission meets to discuss budget vote

The European Commission met this morning to work out a response to yesterday's decision by euro zone finance ministers not to discipline the two biggest economies in the zone for being in breach of budget regulations.

Ministers defied the European Commission yesterday by suspending budget disciplinary action against France and Germany even though they are expected to break EU deficit limits for the third year in a row in next year.

The French Finance Minister, Mr Francis Mer, this morning said the EU should consider revising the pact in 2005 - the year by which Berlin and Paris are to comply with the pact under the controversial compromise.

"We should let the temperature come down again and coolly, let's say in 2005, rethink, with regard to the experiences of the five or six or seven years of the pact's functioning, how we should improve it in a democratic fashion," Mr Mer said.

Yesterday the Minister for Finance Mr McCreevy stoutly rejected suggestions that euro zone ministers had damaged the Stability and Growth Pact by deciding to suspend action against Germany and France for breaching the budget rules underpinning the euro.

"I do not accept that the pact was stabbed in the back," Mr McCreevy said yesterday.

Mr McCreevy was one of eight euro zone finance ministers to vote in favour of asking Berlin and Paris for a political commitment to cut deficits that are set to break EU limits for the third year in a row in 2004.

The ministers sought such a commitment instead of pushing Germany and France into a disciplinary process whose ultimate sanction is a fine.

Spain, the Netherlands, Finland and Austria voted against the decision while the  Spanish Prime Minister Jose Maria Aznar said it was "not a good day for Europe".

The Belgian Finance Minister Mr Didier Reynders, who reluctantly voted for the deal, spoke of a dangerous precedent that could make it harder to negotiate a new EU constitution next month.

Minister McCreevy however shrugged off suggestions that France and Germany had bent the rules in order to protect themselves. "We are not in a Utopian world to enforce a set of rules regardless of the effect it will have on populations," Mr McCreevy said.

"Politics is about the betterment of the people we represent," he added.

He said the decision had no implications for next month's Budget and insisted the decision was not an invitation to act irresponsibly.

"It's a totally different situation. What we've been trying to do in Ireland is to try to get the rules of the Pact changed regarding what is counted in some of those areas. But we haven't been able to agree on changing the rules. Nor did we today," he said.

However, Labour's spokesperson on Finance, Ms Joan Burton, said the Pact had been seriously undermined following today's suspension of disciplinary action against Germany and France.