EU leaders approve reform loosening budget rules

European Union leaders met in Brussels on Tuesday and approved a reform of the Stability and Growth Pact, governing the euro. The agreement that limits the size of a nation's budget deficit had been criticised for not allowing governments to boost economic growth by spending more. The leaders rubber-stamped a deal negotiated by their finance ministers on Sunday which loosens strict deficits rules and allows countries to claim exemption for all sorts of public spending. Radio Prague's Martin Mikule is now in Brussels.

Prime Minister Stanislav Gross in Brussels, photo: CTK

"Well, the reform means the rules are becoming kind of softer now. The original limits regarding the budget deficit and the national debt remain the same but what is changing are the sanctions. Whereas before there were strict sanctions for breaching the rules, now the countries can avoid the sanctions if they prove that their investments that caused the deficit were indispensable and justifiable."

It was mainly Germany and France that had problems respecting the rules of the Stability Pact. But what was the stance of the Czech Republic?

"Well, the Czech Republic agreed with the reform of the Stability Pact even though it did not push for it. The Czech Prime Minister Stanislav Gross, who is leading the Czech delegation here in Brussels, stressed another issue that has been also debated, and that is the European social model. He said that for him it is the absolute priority of the European social policy. Apart from that, other issues were also discussed, especially the liberalisation of services, and that caused a lot of controversy and a lot of heated debates are still expected on that issue here in Brussels."

Was anything else discussed at Tuesday's meeting, apart from the economic issues?

"Yes, there were also a number of other issues discussed, particularly Croatia. The Czech Foreign Minister Cyril Svoboda said they also discussed the reform of the United Nations, namely the reform of the Security Council that should be made more efficient than it has been until now."

Bankers across Europe, including the Czech National Bank, have not welcomed the change, calling instead for greater fiscal discipline. But the head of the EU Office at the Ceska Sporitelna bank, Petr Zahradnik, says that the impact on the Czech Republic will be limited.

"I would say that for the Czech Republic it's rather neutral news because the Czech Republic itself now is on the way of improvement its fiscal discipline and this reform is made especially for countries with very serious fiscal problems, like Germany, France, Italy and so on. So for the Czech Republic, maybe, it means a slight softening of conditions for fiscal discipline but I think that we should not respect the new conditions of the Stability Pact. We should identify for ourselves rather harder criteria and follow the original Stability Pact conditions."