BRUSSELS, Feb. 6 (UPI) -- Europe's single currency looks set for further falls as squabbling over the euro-zone stability pact between the European Commission and ministers of the 15 EU member states heightens.
The commission has run into rough water after its warning last week to Germany that its economy is in danger of exceeding the 3 percent deficit limit.
While the EU executive says it has no problems with Germany's economic deficit in general, its government borrowing is running perilously close to the 3 percent limit. It also issued a similar warning to Portugal.
The U.K. Chancellor Gordon Brown also received a reprimand for his medium-term fiscal plans despite the fact that Britain is not part of the euro zone and still retains the pound sterling.
The commission affronted the British government, currently running Europe's most successful economy, saying that it believes Brown is not acting decisively enough to ensure that the U.K. budget remains in balance. Brown has announced ambitious new spending plans and the warning has been seized on as representing a Brussels demand to cut spending on Britain's health service.
Now Germany, whose Finance Minister Hans Eichel is furious that the warning should have been given "before the event" in a critical election year, has support from France, also facing elections this year.
Support also has come from Spain, Italy and especially from Britain, where Prime Minister Tony Blair is considering when it would be most favorable to run a referendum on membership of the euro.
Gerrasimos Thomas, the commission's spokesman on economic and financial matters, was unrepentant. The commission remains responsible for ensuring that the stability pact, designed to prevent individual governments from rocking the euro boat, is followed.
The commission will not withdraw its warning. "To do so would be to weaken and undermine the euro," he said, adding, "we remain the best option for the stability of the new currency."
But it is now almost certain that EU ministers will refuse to support the commission when they meet next Tuesday.
A financial analyst based in Brussels, who preferred not to be identified, commented: "If ministers now refuse to support the commission, which is the expected course of action, it offers no hope of restoring confidence in the euro. If the warning is withdrawn or not officially issued, it has been made public and the damage has been done.
"If the warning goes ahead, then the German government will have to face domestic criticism of their economic policies, and probably the warning to the U.K. has done serious damage to opinion in an already largely Eurosceptical country," the analyst said.
