'No need to change' Europe's budget rules: Merkel

BERLIN - German Chancellor Angela Merkel said Wednesday she sees no need to change Europe's budget rules after her economy minister suggested that countries be given more time to get their finances in order.

"We're agreed: there is no need to change the Stability Pact," Merkel told reporters, referring to a strict set of EU fiscal rules requiring member states to keep their deficits in check.

"The Stability Pact as it now stands already contains all the flexibility we need to overcome the problems. We are all convinced of that," Merkel told a joint news conference with Tunisian Prime Minister Mehdi Jomaa.

She added that she had consulted ahead of an earlier weekly cabinet meeting with Economy Minister and Vice Chancellor Sigmar Gabriel, the head of the Social Democrats, who are junior partners in her left-right coalition government.

Gabriel had hinted in a newspaper interview earlier that countries such as France and Italy could be given more time to get their finances in order.

In comments which analysts said could re-start a debate over austerity and growth in Europe, Gabriel struck a conciliatory tone to countries struggling to meet the conditions of the Stability Pact.

"I'm in favour of more honesty in the debate," he told German daily Bild.

"We Germans are in better shape than other countries because we pushed through a tough reform programme. But we, too, needed time to cut our state debt," Gabriel said.

Under EU rules, public deficits - the shortfall between government income and spending - should not exceed 3.0 per cent of annual gross domestic product.

Accumulated debt - the sum of all those annual deficits - is supposed to be kept at 60 per cent of GDP.

On Monday, Gabriel had joined his French counterpart Arnaud Montebourg in calling for more time for indebted European countries to implement reforms to rein in their budget deficits and Montebourg welcomed Gabriel's support.

Merkel's conservatives in Germany's "grand coalition" are opposed to any easing of deficit rules.

And Gabriel seemed to try to backpedal somewhat in the Bild interview.

"We mustn't stray from the Stability Pact," he said.

"It's not enough simply to announce reforms. The Stability Pact provides for flexibility and time once the reforms have been implemented." German government spokesman Steffen Seibert also insisted that "the Pact already comprises the necessary flexibility.

"That's why we must act within the framework of the Pact," he told a regular government news conference.

Berlin is not planning to change it, Seibert said.

On Tuesday, the French national accounting court said that France was set to miss its extended target for reducing its public deficit this year.