Italy on Tuesday became the the first country to face disciplinary action under the European Union's revamped stability pact amid fears that public borrowing in the eurozone is getting out of control.
The European Commission wants to crack down on Italy's ballooning budget deficit to set an example to other countries and to prove that the eurozone can still maintain budgetary discipline.
Financial Times 8/7 2005
But finance ministers meeting in Luxembourg fear that borrowing in Germany, the eurozone's biggest economy, is just as worrying and could severely undermine the credibility of the pact.
The opposition Christian Democrats, favourites to win German elections in the autumn, have warned that the German deficit could top the EU's 3 per cent of GDP limit until 2007. They do not expect it to fall back until 2009.