Germany softens its stance on stricter EU budget rules

LUXEMBOURG - Yielding to French pressure, Germany on Monday softened its stance on stricter eurozone budget rules, officials said, angering governments that counted on Berlin to force through sanctions for nations living beyond their means.

Ahead of a two-day meeting of EU finance ministers, Germany was an ardent proponent of a proposal by the European Commission, the EU's executive, to impose near-automatic sanctions on nations that breach the bloc's budget deficit and debt levels.

But at the meeting, Berlin softened its stance under pressure from France and others reluctant to transfer too much power to unelected Brussels bureaucrats.

Sweden, Finland and the Netherlands - three countries that counted on Germany to insist on sanctions - were frustrated by the apparent German turnaround.

The EU wants to force member states whose deficit tops 3 percent of its budget or whose debt hits 60 percent of gross domestic product to set aside up to 0.2 percent of their GDP. If they ignore suggestions on how to fall back into line, their deposits may be converted into fines. Only a majority vote of EU finance ministers could overrule sanctions.

Finance ministers also were divided over when new rules should take effect. Italy in particular wants more time to slash its debt load, now at about 120 percent of GDP.

Pressure on EU member states to get their economies in order is mounting as a surging euro is casting doubt over the continent's fragile recovery.

In what some have called a "global currency war," governments worldwide try to boost their economies by pushing down the value of their currencies to make their exports more competitive.

"Countries should not use currency as a means of competition," Dutch Finance Minister Jan Kees de Jager said as he arrived in Luxembourg.

The European Central Bank, which sets monetary policy for the 16 countries that use the euro, appears likely to remain on the sidelines in any currency war.

A hands-off policy by the ECB could mean trouble for the currency union's weakest members, which are facing harsh government budget cuts and are desperate for export-led growth.