EU budget rules must change says UK finance minister

LONDON - EU budget rules still pose problems for low debt countries such as Britain after revisions agreed by EU finance ministers and will have to change in years to come, Chancellor Gordon Brown says.

The British finance minister criticised the Stability and Growth Pact for still hampering investment in some countries.

"The assumption is that the maximum deficit over an economic cycle that could be run, current and capital, is minus one per cent," Brown said.

"That makes it difficult for a low debt country to run the investment programmes that are necessary to improve its infrastructure," he told parliament's cross-party Treasury Committee on Tuesday.

"Low debt countries like ourselves should not be prevented from investing in our future," he added, but said the pact did not apply to Britain as a euro outsider.

EU finance ministers clinched a deal on Sunday to relax the budgetary rules that underpin the euro after repeated breaches by Germany and France, bowing to Berlin's key argument that reunification costs be exempted.

Brown, who has long argued that the pact needed some flexibility built in, described the pact as a changing set of guidelines.

"It is an evolving pact that will change in the years to come," he said.

Brown said the latest changes had no impact on Britain's position on joining the single currency.

"The rules that we think are appropriate to us are different to the rules that other countries think are appropriate to them at this moment," he said, referring to the pact.

In his annual budget last week Brown ruled out looking at Britain's economic readiness to adopt the euro. That decision held for the rest of 2005.

"That could not be looked at again this year," he told the committee.

- REUTERS