The European Commission has voted to issue formal reprimands to Germany and Portugal for their rising budget deficits. These approach the euro-zone stability and growth pact's limit of 3% of gross domestic product.
As the EU's largest economy, Germany will be particularly embarrassed by these unprecedented warnings which must be approved by EU finance ministers. Germany was largely responsible for the stability pact.
The German government has now revised upwards its budget deficit forecast for this year. It has predicted that it will reach 2.5% of GDP rather than its earlier 2.0% forecast.
The Economic and Monetary Affairs Commissioner said that there was no alternative under the circumstances. "If we do not act at this point, the credibility of the euro zone stability and growth pact would be called into question," said Pedro Solbes.
The warning recommendation reportedly faced strong opposition from some commissioners, who felt the Commission would send mixed messages. The German government was recently assured that its budgetary policy was "correct".
