Three new Member States join ERM II 

Estonia, Lithuania and Slovenia have all taken a first major step towards abandoning their respective national currencies - the kroon, the litas and the tolar. The Commission has identified and produced reports on 'excessive deficits' in six of the newest Member States.

The move comes against a climate of uncertainty with regard to the application of the rules of the Stability and Growth Pact. The European Court of Justice has just announced a date - 13 July - for its ruling on the Commission's legal challenge against the EU Council of Ministers. The judgement relates to the implementation of the Excessive Deficit Procedure under the rules of the Stability and Growth Pact. France and Germany have repeatedly violated the pact. For the Commission, the final straw came when finance ministers backed Germany and France in their challenge to the EU's disciplinary rules on budget spending on 25 November 2003 (see

).

Commenting on changes to the Excessive Deficit Procedure (EDP) under the new EU Constitution, Director of the Centre for European Policy Studies Daniel Gros calculates that [based on a eurozone of 12 members] the requirement of the assent of 72 per cent of member states means that four member states that do not support sanctions [or any steps along the procedure] can block the procedure.

He adds that the 65 per cent of population requirement has more complicated consequences. "Basically it implies that two 'large' member countries constitute a blocking minority. Under the present system this was also the case for a procedure against a large country, but not against a small country. The new system thus makes it more difficult to enforce the EDP. Before it was not enforceable against large countries, now it becomes difficult to enforce even against small countries," noted Gros.