EU Reviews Stability Pact Sinners

German Finance Minister Hans Eichel said Tuesday he will step up measures to rein in the country's deficit while avoiding actions could hurt badly needed growth.

"We are prepared for further measures, but we will not take measures detrimental (to growth)," Eichel said ahead of a meeting with EU finance ministers. "If it becomes clear that the economy is getting weaker, then financial policy has to be aware not to make the problems bigger."

EU economic affairs commissioner Joaquin Almunia said the the European Union's executive commission is keeping a close eye on the budget situations of France and Germany this year.

But he said that the situation was more difficult in Germany because of weak economic growth.

The European Commission estimated last week that the German economy, the biggest in the eurozone, would grow only 0.8 percent this year, the slowest rate in the 12-nation bloc. It also forecast that Germany would have a deficit of 3.3 percent of gross domestic product this year, in excess of EU rules for deficits no greater than 3.0 percent.

Greece doing better

EU finance ministers meanwhile accepted the promise by their Greek colleague to keep his country's deficit in check. They agreed not to impose further sanctions against Greece, which has said it will bring its deficit below the maximum level allowed by the EU's stability and growth pact, which sets a limit of 3 percent of Gross Domestic Product (GDP).

Greece has not managed to stay below the limit so far and last year's deficit is estimated to be 6.1 perceent.

Sanctions against Italy?

Italy now also faces sanctions by the EU: Almunia said at Tuesday's meeting that he will present a report on the matter before the end of June. According to EU officials, Italy's deficit will be 3.6 percent this year and 4.6 percent in 2006 and would hence violate the pact.