Mr President, Commission President Mr Prodi described the Stability and Growth Pact last week as 'stupid, like all decisions which are rigid'. Commissioner Lamy is also on record as having described the pact as 'medieval'. Aside from the questionable wisdom of using such strong language, especially to a newspaper from the country which is doing the most damage to what remains of the credibility of the Stability and Growth Pact, one begins to wonder whether this is part of an orchestrated campaign. My question to the Commission President is this: in making your remarks to Le Monde – and you have said that you stand by every word – was it your intention to launch a debate on how to reform the Stability and Growth Pact? If so, that is a debate we welcome, but surely a debate which would better have been conducted some months ago. Had the Commission acted more firmly then, using the licence that we gave you when we invested you, its own authority and that of the Stability and Growth Pact might have suffered less damage. In the current circumstances, no change is clearly not an option, but two principles must guide us. The first is that a well-run economy and a stable currency require taxes and spending to be in balance over the course of the business cycle. The second is that the rules are the same for all countries, large or small. Those principles are at the heart of the Stability and Growth Pact and my group expects them to be the starting point for any reform. If today marks the beginning of a debate on how to improve and strengthen the Pact, what reforms do we need to give it renewed credibility? First of all let us be clear on what we should not do. We should not call into question the 3% limit for deficits as we hit hard economic times. If countries do not pay off their debts, then we will all pay the price in higher interest rates and a weaker currency. The agrees with Mr Prodi that the Stability and Growth Pact must be applied intelligently. That is why we supported the Commission's decision to allow two more years for countries to return their budgets to balance, because growth had been slower than expected. But we must not forget that postponement to 2006 came with strings attached in the form of a requirement to reduce structural deficits by 0.5% year on year. The believes that a new target for the structural deficit should be included in the Stability and Growth Pact. That would increase pressure on governments to reduce their deficits in their good times so that they can allow borrowing to take the strain when times are bad. On that analysis, any intelligent interpretation would clearly conclude that France's recent budget makes no effort to reduce its structural deficit and is clearly in breach of the Stability and Growth Pact. France must therefore face an early warning. That is what we would like to hear from the Commission today. When the Commission brings forward a proposal for such an early warning, then it will help to restore credibility to the Pact. The agrees with you, Mr Prodi, that the Stability and Growth Pact needs authority behind it to apply it. That is why we call for the Commission to have the power to issue early warnings against countries which are breaching the rules, whether Finance Ministers agree or not. Only if the Pact has a strong policeman can Member States be forced into taking corrective action while they can afford to. Let us be clear. We will not support any reforms to the Stability and Growth Pact which undermine the basic principles of fiscal responsibility and equality before the law. The end point of reform must be a strengthened Stability and Growth Pact which punishes fiscal largesse and rewards countries which run their budgets responsibly. Judging by the warm welcome which Francis Mer, the French finance minister, gave to your remarks in that interview, I fear that France will feel empowered to flout the rules. If you wish to have the authority to enforce the Stability and Growth Pact, then you must earn that authority by acting promptly against France and any other countries which might be tempted to follow their example. (Applause)

Political group: ELDR