Get-out clause list dropped in new EU pact draft

Instead, each country would be able to argue its own case before the EU council of ministers and the European Commission for breaking the budget spending rules, which underpin the euro.

The draft, obtained by Reuters on Friday, reiterates that EU countries must keep budget deficits below 3 percent and debt to gross domestic product ratios no higher than 60 percent.

Germany and France broke the budget deficit limit for 3 years in a row and have been pushing hard to relax the rules, known as the "Stability and Growth Pact."

European Union finance ministers failed to reach an agreement on the pact's reform on March 8 and will discuss the new Luxembourg proposal at an emergency meeting on Sunday to reach a deal in time for the March 22-23 summit of EU leaders.

At the last meeting on March 8, ministers could not agree on whether there should be a list of factors which would allow member states to run budget deficits in excess of the 3 percent limit, and if so, what should be on it.

"Clearly no redefinition of the Maastricht reference value for the deficit (of 3 percent of GDP) via the exclusion of particular budgetary items should be pursued," the draft said.

Germany wanted the revised pact to allow it to take into account the costs of reunification and its sizeable contributions to the EU budget in the evaluation of its deficit.

But Luxembourg proposal makes no specific reference to the two items.

It does, however, say that in assessing a country's compliance with the pact's rules, the European Commission should give special consideration to spending on research and development, fostering international solidarity and "achieving European policy goals."

This is likely to please France, which wanted its research spending and development aid to be taken into account even if another item, defence expenses, are not specifically mentioned.

The draft also seeks to accommodate the demands of countries like Poland, Hungary, Slovakia or Sweden for the revamped pact to give special consideration to their expenses on pension reforms in evaluation of their compliance with its rules.

Luxembourg proposed to give member states reforming their pension systems five years before their costs could no longer be considered towards reducing the deficit.

Such countries could claim 100 percent of the net cost of the reform in the first year, 80 percent in the second, and then 60 percent, 40 percent, and 20 percent, respectively in the following years.

Source: Reuters