BRUSSELS (AFP) - European Union finance ministers wrestled with a proposal to overhaul an ineffective set of budget rules, but faced with lingering differences they postponed concrete action until January at the earliest.
Also weighing on ministers from the 25-nation EU gathered here is the steadily eroding strength of the US dollar and its potentially damaging impact on exports from the 12 EU members using the euro single currency,
Eurozone finance chiefs conferring here late Monday made no secret of their disquiet over what they called "excess volatility" on exchange markets.
The euro was approaching a record against the dollar in London Tuesday, trading at 1.2980 dollars after 1.2945 late on Monday in New York.
The euro rose to as high as 1.2984 dollars at one point, closing in on a record of 1.3005 dollars reached on Wednesday of last week.
Luxembourg Prime Minister and Finance Minister Jean-Claude Juncker appealed to the United States to implement a strong dollar policy, warning that a sharply sliding euro threatened the region's already fragile rebound.
"It's our message to the United States because the United States has no interest in seeing the dollar fall as it has ... That could endanger the European recovery and weak growth in the eurozone is in the interest of neither the United States nor Europe."
But the principal issue before the meeting is the fate of the Stability and Growth Pact, which has in effect been frozen for a year since ministers backed away from taking sanctions against France and Germany for their failure to curb their public deficits.
The 1997 pact requires eurozone members to hold their annual public deficits to less than three percent of gross domestic product, a threshold France, Germany and several other countries have failed to honor.
Ministers on Tuesday discussed reforms to the pact put forward by the EU executive commission, notably a definition of the exceptional circumstances under which countries could be allowed to breach provisions of the pact.
But an EU source said the meeting took no decision on the proposal, agreeing that the issue would again be on the table in January.
"We need several months to arrive at a consensus," said Finance Minister Gerrit Zalm of the Netherlands, whose country holds the rotating EU presidency.
His counterpart from Austria, Karl-Heinz Grasser, left little doubt where he stood Tuesday on calls for easing some of the pact's provisions.
"We are in favor of a strong stability pact, for that is the key to European monetary credibility," he declared.
"There is absolutely no need for exceptional circumstances."
German Finance Minister Hans Eichel maintained that some progress had been made since the confrontation last year between the European Commission and the ministers.
That a debate is needed on reforming the pact is accepted by all parties, he said, adding that "no one believes it will lead to its weakening."
But he acknowledged that there remain "differences in points of view," notably on methods used to calculate public finance deficits.
Eichel said it was "unfair" that a net payer to the EU budget cannot deduct its contribution from its public deficit figure while those countries that are net debtors are able to make use of that contribution to reduce their shortfall.
"In the 3.5 percent German public deficit, 0.5 percent is linked to its net contribution to the EU budget," he said. Germany is the leading contributor to EU coffers.
Another prickly subject for the EU is the future of Britain's rebate.
The commission in July proposed that the rebate obtained by then-British prime minister Margaret Thatcher in 1984 be spread among several net contributors to the EU budget.
EU members contributing more to the budget then they receive argue that Britain is much richer now than it was then, while London argues that it receives comparatively little from community farm aid.
"The UK rebate is still fully justified in itself," British Chanellor of the Exchequer Gordon Brown insisted.
"It is premature to discuss any generalized correction mechanism at this stage. It makes no sense to propose such a mechanism which ... in practice widens these disparities."

11/16/2004 - 16:37 GMT - AFP