EXCESSIVE DEFICITS : COUNTDOWN BEGINS FOR GERMANY TO CUT ITS BUDGET DEFICIT.

Some feared he might miss the Council's final decision owing to the Franco-German summit in Berlin, but Germany's Finance Minister, Peer Steinbruck, honoured his obligations and watched on as the EcoFin Council on 14 March formally adopted the European Commission's - landmark - Recommendation to step up the excessive deficit procedure against the EU's leading economy (Article 104-9 of the Treaty).a

A symbolic decision (Germany has been flouting stability pact rules with impunity for five years) which theoretically leaves Berlin open to financial penalties if it fails to honour its commitments and get itself back in line with the growth and stability pact by the end of 2007.

"Some expressed scepticism as to the future of the stability pact following the crisis of November 2003 (when the Pact was frozen by the Council)", recalled Economic and Monetary Affairs Commissioner Joaquin Almunia. The fact is that the revision of the Pact "has now enhanced its credibility", said EcoFin President-in-office Karl-Heinz Grasser.

In practical terms, the new ruling coalition in Berlin now has four months until 14 April to confirm its commitment to cut its budget deficit. The Commission will then proceed with a further evaluation of the situation and may, "in the event of a positive analysis", put the procedure on hold. Germany will nevertheless remain under the stewardship of the Commission. Every six months (in October 2006 and April 2007) the Commission will scrutinise the progress of budgetary consolidation measures undertaken...