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Euobserver today

http://euobserver.com/?aid=17161&rk=1

Plans to reform the Stability and Growth Pact - the set of rules underpinning the euro - are set to be announced by the European Commission this Friday (3 September), according to French financial daily, Les Echos.

The reforms are expected to result in a softening of the rules, which have caused huge rows in recent months between member states themselves and between Brussels and some EU countries (notably France and Germany).

Two main changes to the rules are expected, according to the Financial Times.

First, the circumstances under which a so-called excessive deficit is permitted are expected to change.

Presently, a member state may run a budget deficit over three percent only in the event of a severe recession. But the reforms will propose that a longer period of soft growth will allow member states to break the three percent ceiling.

Second, Brussels is likely to soften the deadlines it imposes on EU countries to reduce their deficits. Currently, a country in breach of the pact is given four months to publish a plan to get the deficit down and then has one year to implement it. A reformed pact is likely to tailor the deadlines to the individual country concerned.

In other words the French and Germans who were so very keen on these rules in the first place do not want those rules to apply to them, only everyone else.

If the Germans wish to have a strong Euro they should buckle down and take the consequences of their own actions, there is no reason for the German or French people to be shielded from the effects of these rules when others in the community must be subject to them. As the reformed rules are going to be tailored to each country it is obvious that the stronger countries will have greater influence than the weaker ones to affect the outcome of the rules which will apply to them.

As the power of the Euro is unpinned by the Stability and Growth Pact it will be interesting to see the effects these changes will have on the currency itself on the world markets, when the big member states can ignore the pact and run their economy to suit themselves. After all the whole idea of the Euro was for all to work together as one unit otherwise the whole exercise is meaningless.