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Ireland backs move by Euro finance ministers

February 16, 2011

By Staff Reporter

In an unprecedented statement, the ECB’s governing council condemned the ministers’ decision not to discipline France and Germany for breaching the Stability and Growth Pact.
Following an emergency teleconference, the governing council hinted that failure to bring budget deficits in France and Germany under control could lead to a rise in interest rates.
“The public can rest assured that the governing council remains staunchly committed to maintaining price stability,” the statement said.
Market analysts in Dublin expect ECB interest rates to start moving up next year and they warn that the expectation that this will happen could push up longer-term bond interest rates moving into 2004 — increasing the cost of fixed-rate mortgages .
After an all-night meeting in Brussels, the finance ministers called on Paris and Berlin to bring their budget deficits below the pact’s limit of 3 percent of GDP. However, they rejected a demand by the European Commission to discipline the EU’s two biggest economies under a procedure that could trigger fines if they fail to comply.
The commission accused the ministers of disregarding rules enshrined in an EU treaty and expressed deep regret at the decision.
Irish Finance Minister Charlie McCreevy defended the deal, which he said had taken account of political and economic reality.
“I think the council of ministers acted in the best interests of Europe,” he said. “We’re here to act in the best interests of the electorate of the various member states. We are not in some Utopian world to try and enforce a set of rules irrespective of the outcome that would have on the population of various member states.”
He said the decision had no implications for next month’s budget, pointing out that Ireland still enjoyed economic growth rates of twice the EU average.
McCreevy said that although the government would like to see a more flexible interpretation of the pact, yesterday’s decision was not an invitation to act irresponsibly.
“It’s a totally different situation,” he said. “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.”
Only four countries — Austria, Finland, the Netherlands and Spain — opposed the decision to spare Paris and Berlin from the disciplinary procedure. The Dutch Finance Minister Gerritt Zalm said that yesterday was a grave day for Europe. “The pact does not work,” he said. “You can read it, but you can’t apply it.”
Former Labor Party leader Ruair

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