EU SUMMIT Leaders Stress Stability,Growth Pact Commitment

By Robert S Duncan

Dow Jones International News

SEVILLE, Spain (Dow Jones) European leaders reiterated Saturday their commitment to the European Union's Stability and Growth Pact and at the same time, voiced their conviction that the region's economy is on the upswing.

They also called on member states to follow budgetary policies in line with Broad Economic Policy Guidelines recommendations.

In a statement issued at the tail end of the two-day E.U. summit in Seville, leaders sought to allay any concerns that they weren't committed to the Stability and Growth Pact and to fiscal consolidation. While not specifically mentioning Thursday's E.U. finance ministers' agreement - with respect to budget-deficit criteria - there had been some talk that perhaps that compromise could be construed as the leaders being soft on budgetary discipline.

E.U. finance ministers Thursday held a six-hour meeting in Madrid, which ended in the early hours of Friday, where a compromise was reached. As part of the compromise, France, Germany and Portugal will bring their budgets into or near balance by 2004.

French finance minister Francis Mer said France will be able to achieve the goal if its gross domestic product rises 3% in 2003-2004. At the same time, E.U. finance commissioner Pedro Solbes said that a budget deficit of up to 0.5% of GDP would be close to balance.

Elsewhere in Saturday's statement, the 15 E.U leaders said member states are encouraged to use any growth dividend related to the economic recovery to consolidate public finances further.

"The recent downturn in economic activity has ended. The European economy is set to reap the benefits of sound macroeconomic policies and ambitious economic reform, which will underpin the ongoing recovery of growth and job creation and enable economic uncertainty to be faced more effectively," the leaders said.

No actual economic forecasts were released in the statement.

The leaders also said they welcomed the adoption of International Accounting Standards Regulation and recent political agreements on financial conglomerates, market abuse and occupational pension fund directives, as well as reaffirming their "commitment to the timely and full implementation of the Financial Services Action Plan."

European leaders were gathered in Seville for a two-day summit, the last to be hosted by Spain as its E.U. presidency winds down. Denmark takes over the rotating six-month presidency in July.