INSTRUCTIVE NEW CHALLENGES FOR THE EURO.

European Union Finance Ministers are confronted by yet another management problem with their awkward child, the Euro. They have to decide whether to start formal action against Italy for breaking the rules of the Growth and Stability Pact. And they have to do so at a time when the Pact itself is under serious question.

In technical terms, Italy has broken the rules, by running a deficit beyond the threshold of 3% of GDP that the Pact requires. But there are reasons for hesitation before initiating the Pact's early warning procedure.

Two other Member States have so far refused to take any notice of the warnings they have received for breaking the rules.

Not just any two Member States, either. Germany and France are openly resisting the authority of the Pact, arguing that national circumstances justify departing from its strict rules.

So when one more of the EU's largest economies (and one more of the founding member states) runs into trouble with the rules, it is an obvious prompt to reflect on whether the rules are right.

The European Court of Justice is due to give its judgement before the Summer on the legitimacy of the Franco-German demands for exceptional treatment. And the European Commission itself, the watchdog whose bark is...