Appeal could spark EU budget row
By CNN's Liz George
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Solbes wants tougher action against France and Germany.
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LONDON, England (CNN) -- The European Commission will decide Tuesday whether to take France and Germany to court over a long-running budget dispute.
The EU's executive arm is expected to ask a judge to annul a decision that allowed the two countries to escape fines for breaking EU budget laws.
In November, EU finance ministers agreed to accept a political commitment from the countries to bring their budget deficits back into line -- rather than impose a harsher penalty or force them to make budget cuts.
But Pedro Solbes, Europe's monetary affairs commissioner, thinks Paris and Berlin got off lightly -- and he's determined to press the matter.
Solbes' push for action could cause another dangerous rift -- not only between France and Germany and Europe's smaller nations, but also between the member nations and European Union institutions.
"They really will feel that the European institutions have gone too far -- both the commission and the court -- and they will then try to reduce their powers in other areas ... where they are currently accepting their powers in competition or internal market," says Charles Jenkins of the Economist Intelligence Unit.
"I think it is taking a very risky approach, and I don't think the situation is that dire to warrant such a risky approach."
The budget deficit rules were first introduced at the insistence of Germany and France.
They were concerned that some EU member countries would get around tough monetary policy by increasing government spending and running large budget deficits.
But recession has caused them to fall foul of the very rules they wanted.
"They also failed to save enough money during the good times in the late '90s, when there was plenty of money accumulating in the coffers. Instead of actually sensibly trying to reduce their deficits at that time they simply spent the money," says John Higgins of Nomura.
"I think that is part of the reason why the commission has become frustrated with France and Germany's pleas that they shouldn't be aggressively tightening in this downturn."
The commission had wanted France and Germany ordered to cut their deficits to get back under the threshold by 2005.
Finance ministers ignored this, and commission lawyers decided the move could be challenged in the European Court of Justice.
If that happens, it will be the first case of its kind. And it will highlight the difficulties the commission is facing in trying to uphold EU law in conflict with increasingly assertive member states.
