Officials believe they have enough legal leeway to relax budget deficit targets for eurozone states without violating the Stability and Growth Pact, though the plans risk a serious showdown with Germany. "The Stability Pact is not stupid. There are elements of flexibility when growth is lower than expected," said a senior Commission strategist.
Current EU rules stipulate that every state must cut its deficit to 3pc of GDP by next year but this is not written in stone. "So long as a country is doing its homework and taking 'effective action', we can show some flexibility," the strategist said.
Marco Buti, director-general of economics at the Commission, said EU framework "leaves considerable scope for modulating the fiscal policy reaction" and "explicitly allows for the playing of automatic stabilisers" in response to shocks.