The European Commission has decided to seek a swift court ruling to overturn finance ministers' effective suspension of budget rules for France and Germany.
The bid to prove that governments cannot ignore EU laws and procedures is expected to lead to a clash between the two camps and could generate market uncertainty.
Ireland, as Council President, had called for a period of reflection before any drastic action is taken. But the European Commission, which is responsible for enforcing the bloc's laws, argued that a court ruling was vital to clarify the disciplinary procedures applied to those who break the EU's deficit ceiling as Paris and Berlin have done.
The move is seen as risky, as there is no guarantee that the Commission will win its case. The Commission's legal service has concluded that finance ministers broke the law by taking an ad hoc political decision to suspend the rules after rejecting a Commission recommendation to order Berlin and Paris to make deeper deficit cuts in 2004.
But member states' own legal advisers in the EU Council said ministers had a discretionary power to reject the Commission's view, even if the procedure they adopted was legally dubious. Also, the Commission has few supporters in EU capitals, even among those who took its part last year.
At the same time, the Commission is working on an initiative to be unveiled next month that will adapt the way the budget rules are applied to take greater account of countries' debt, health costs and pension liabilities, and provide clearer rules for improving public finances in periods of growth.