The FINANCIAL — Eurozone should respect the agreed rules, Germany’s finance minister said Sunday.
European Union states who fail to respect the agreed rules on their deficit should have their EU subsidies frozen, published EU Business web-edition today.
"We could quickly block the instalments of European funds" to countries whose deficit exceeded the permitted amount, Wolfgang Schaeuble told the Frankfurter Allgemeine Sonntagszeitung newspaper.
The European Union's 1997 Stability and Growth Pact requires the bloc's members to maintain fiscal discipline, notably by holding annual public deficits to under 3.0 percent of output and to work toward securing surpluses in times of robust growth.
Eurozone countries are struggling with a debt crisis caused in part by some member states' failure to respect the limits set by the pact.
Schaeuble argued that the EU should not in future wait for the situation to get out of hand.
But at the same time he rejected the idea that Greece should have to leave the eurozone.
"The euro zone would suffer an irreparable loss of confidence if a single one of it members left the monetary union," he warned.
"I don't even want to try to imagine what that would do if the markets realised that they can expel a country from the eurozone," he added.
The European Union is currently looking to strengthen its methods of sanctioning states that do not demonstrate sufficient budgetary discipline.
Several eurozone countries have called for tougher sanctions in exchange for backing bail-out packages for Greece, Ireland and Portugal to help them avoid default.
The European Parliament has also considered fining countries that run high deficits.
Eurozone countries in March agreed on the broad outlines of a plan designed to control deficits, but member states tried to limit the scope of any automatic sanctions, hoping to maintain some political flexibility.