Do As We Say . . .

Do As We Say . . .

Financial Review: Euro zone in crisis after deficit deal

The European Union was plunged into bitter recrimination on Tuesday after finance ministers let France and Germany off the hook for repeatedly breaking the euro zone's strict budget rules.

The decision struck at all-night talks left the EU's Stability and Growth Pact - the set of rules underpinning Europe's single currency, ironically designed by Germany to restrain freer-spending countries - in tatters.

The European Commission refused to rule out legal action and the European Central Bank (ECB) issued a hard-hitting statement warning that the deal carried "serious risks".

The accord, endorsed by ministers from all 15 EU nations, suspended "for the time being" disciplinary measures against Paris and Berlin for failing to get their public deficits under 3.0 per cent of gross domestic product (GDP).

But in a separate declaration, the ministers reaffirmed their commitment to the pact as the bedrock of "sound and sustainable budgetary policies" in the EU, and pledged to promote "equality of treatment" under the pact's rules.

The deal was pushed through in the teeth of opposition from EU Economic and Monetary Affairs commissioner Pedro Solbes, whose normal geniality deserted him as he struggled to contain his anger.

And a clutch of member states that have worked hard to remedy their own finances - Austria, the Netherlands, Finland and Spain - voted against it.