Correspondent's Choice

This story about EU budgetary negotiations was published by EurActiv on 27th September 2010.

Divisions are likely to emerge this week when European Union governments discuss sharpening the rules on budget discipline and its executive makes proposals for tougher sanctions on fiscal sinners.

The negotiations, launched after Greece’s profligacy brought the euro zone to the brink of a sovereign debt crisis, could herald a big shake-up of rules for the single currency 11 years after its creation, European diplomats say.

But the talks could also stall over differences between France, Germany and smaller countries over the scope of reform.

This could mean the EU’s Stability and Growth Pact, an accord that underpins the euro currency, is only slightly amended.

“The last meeting [of EU finance ministers] showed big differences. They are likely to re-emerge next week, the debate is heated […] But some progress cannot be ruled out,” said one EU diplomat.

Leaders’ calls for sweeping changes earlier this year helped to reassure investors and ward off a debt crisis, but enthusiasm has waned as the currency area posted strong growth in the second quarter.

Financial markets would be likely to react nervously to any lack of progress, especially after new doubts emerged over public finances in Ireland.

ING said in a research note that “there still seems considerable room for pessimism to endure under the latest set of proposals.”

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