German Chancellor Gerhard Schroeder meets this week with "Mr. Euro" - Luxembourg's Prime Minster Jean-Claude Juncker - to push demands for loosening strict budget deficit rules which Berlin has violated for the past three years. Juncker, whose country also holds the rotating European Union (E.U.) presidency, is the 12-nation eurozone's chief spokesman. The two leaders will have talks in Berlin on Friday, said Schroeder spokesman Bela Anda. Chancellor Schroeder at the weekend sharpened his government's calls for watering down the euro's "Stability and Growth Pact" which among other things sets a 3 per cent of gross domestic product (GDP) limit for state budget deficits. Germany has breached this limit for the past three years and some analysts predict Berlin will again fail to cut spending sufficiently in 2005. The Schroeder government insists it will not again violate the rule. In a weekend commentary published in the Financial Times paper, Schroeder listed three ways his government wants the loosen up the 3 per cent limit. 1) Germany wants countries which adopt structural reforms in tax and labour markets - as Berlin has done - not to be punished if resulting revenue shortfalls cause them to overshoot the limit. Schroeder also indicated he does not want spending on "education, innovation, research and development" to be counted when tallying up the deficit. 2) Countries in economic stagnation - as Germany was from late 2001 to mid-2004 - should be treated with more leniency when they break the 3 per cent of GDP rule. 3) Special burdens, such as German state transfers to rebuild former communist East Germany should also be taken into account. Berlin has for the past 15 years shifted 4 per cent of the nation's GDP from western to eastern Germany to rebuild infrastructure and pay social welfare bills. Schroeder also argued that Germany's role as the biggest E.U. paymaster must also be taken into account. "Whether a fiscal policy is 'right' and promotes stability and growth equally cannot be measured solely with the deficit reference value of 3 per cent of gross domestic product," concluded Schroeder. Chancellery spokesman Anda underlined that these were exclusive German positions and that they had not been hammered out in advance with close E.U. allies, such as France. The German government wants a revamped eurozone Stability and Growth Pact deal to be agreed by E.U. leaders at their March summit in Brussels, Anda said.
