Germany, France avoid EU fines
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Solbes "completely disappointed" by eurozone finance ministers deal
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SPECIAL REPORT
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LONDON, England (CNN) -- Germany and France have avoided the threat of sanctions from the European Commission, despite breaching strict rules on budget deficits.
Both countries look set to break deficit limits for the third year in a row in 2004. Under the agreed rules, this should result in European Commission recommendations on budget management and heavy fines if the terms are not met.
But eurozone finance ministers have reached a compromise which requires Germany and France to give a political commitment to bring their budgets in line. Ministers also laid out budget cutting targets for both countries but these are below the cuts the Commission had wanted in place.
The EU executive is responsible for enforcing the pact, designed to promote confidence in eurozone finances and protect the credibility of the euro.
"The Commission deeply regrets that these proposals are not following the spirit and the rules of the stability and growth pact that was agreed to unanimously by the member states", said EU Monetary Affairs Commissioner Pedro Solbes.
Several smaller countries are angered that two of the eurozone's biggest members have been allowed to sidestep rules they were instrumental in setting up.
"Portugal made strenuous efforts to abide by the terms of the pact and obviously that's one of the reasons why there's been as much pressure on Germany and France to comply as there has been... still the bottom line is, you end up with a bit of slippage," John Driffill at the Centre for Economic Policy Research told CNN.
Solbes says the EU reserves the right to examine the implications of the decision and decide on possible subsequent action.
