A Franco-German drive to loosen European Union budget rules gained pace on Monday when the bloc's president tabled new compromise proposals, but Austria slammed the plan as a move "in the wrong direction". Paris, Berlin and others who have exceeded deficit ceilings want the Stability and Growth Pact eased by including generous let-out clauses, allowing for a range of costs to be taken into account when deciding how to deal with breaches of the rules.
Austria, one of a group of smaller countries who resent such moves, vowed to resist proposals in a paper circulated by EU president Luxembourg before a meeting of eurozone finance ministers on Monday.
The Luxembourg paper, obtained by Reuters, said allowance should be made for structural reforms of pensions and healthcare systems, as well as exchange rate swings and debt reduction, when assessing how to deal with deficits above the EU ceiling of 3.0 percent of gross domestic product (GDP).
Its long list of mitigating circumstances contained a thinly veiled reference to the huge cost of German unification, saying one factor to be considered in assessing deficits should be "change in the perimeter of general government".
"I think it (the paper) is progress, but to a large part in the wrong direction," Austrian Finance Minister Karl-Heinz Grasser told reporters before a meeting with eurozone counterparts.
On Tuesday all 25 European Union finance ministers meet. Luxembourg said it hopes for a deal this week or at the latest in time for a March 22-23 EU summit.
Grasser said there was no justification for taking into account the costs of Germany's 1990 reunification since this was an old burden that had existed for many years.
German Finance Minister Hans Eichel played down expectations of a deal this week, telling reporters on arrival in Brussels: "I wouldn't be confident that we will get there today, but in the end we will be successful, although we will need more time than was forseen in the original timetable."
France renewed its call for a revamp, insisting the pact needed to take into account longer-term efforts by countries to reform their economies.
Luxembourg proposed changing the definition of "special circumstances" justifying an excessive deficit from a 2 percent growth contraction to any negative annual growth.
Public investment, research and development spending and one-off costs such as natural disasters would also be taken into account when judging a country's budget performance.