EU lawyers threaten France and Germany over euro pact action

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The Independent Online

The EU is on the brink of a divisive power struggle after European Commission lawyers suggested yesterday taking European governments to court for breaching the euro rulebook.

The move threatens to re-open deep divisions between large and small member states and put the European Commission president, Romano Prodi, on a collision course with Paris and Berlin. A legal challenge against the member states could also polarise views and complicate the task of reforming the so-called stability and growth pact, the rules governing membership of the euro.

The threat of legal action follows a row last November when France and Germany persuaded EU governments to suspend the pact, under which Paris and Berlin could have faced huge fines.

At stake is the issue of who polices the pact and how much leeway wayward countries should be given.

A decision on whether to go ahead with court action is due to be taken by the European Commission on Tuesday and officials say there are precedents for challenges against the decision-making body of the member states, the European Council.

Yesterday the European Commissioner for monetary affairs, Pedro Solbes, made his stance clear, arguing that the EU was a community of law whose procedures had to be respected. He added that a Court of Justice ruling could be useful to clarify the framework under which the euro's rules were implemented and said it was going to "seriously consider" mounting a case.

Legal experts at the Commission argue that governments broke EU law by permitting the eurozone's two largest countries to surpass the budget deficit ceiling of 3 per cent of gross domestic product for the third year in 2004. Germany argued that the wording of the treaty allowed countries discretion over whether to pursue disciplinary measures.