New European Commission head Jose Manuel Barroso reiterated that he opposes fundamental changes to the the Stability and Growth Pact, which embodies the budget rules underpinning the euro.

"We don't think it would contribute to the credibility of the pact to have a fundamental revision," he told reporters, in his first press conference since taking over as head of the new EU executive this week.

He was reacting to a call made by Italian Prime Minister Silvio Berlusconi Tuesday to the EU's current Dutch presidency that the bloc should renegotiate the parameters of the EU's Maastricht Treaty concerning public deficits.

New European Commisson head, Portuguese Jose Manuel Barroso gives a press conference after the first weekly meeting of the new Barroso Commission
AFP

Enlarge New European Commisson head, Portuguese Jose Manuel Barroso gives a press conference after the first weekly meeting of the new Barroso Commission

Barroso stressed that the EU's new constitution, signed last month in Rome, reaffirmed the validity of the stability pact. "Respect for the key rules of the Stability and Growth Pact is written into the constitution," he said.

But he said he was ready to work with EU member states to "ensure the necessary flexibility" in interpreting the pact's rules "while respecting its main principles."

In a Portuguese newspaper interview he argued that the existing rules had greatly benefited the European economy.

He told the daily Publico that the pact, which imposes a limit on public deficits of three percent of annual economic output, had contributed to the success of the euro currency and led to low interest rates.

"People sometimes have a short memory. They forget what are the successes of the Stability and Growth Pact," said Barroso, who took office on Monday.

"We can't change the character of the pact. We can't touch its main rules," he added. "It would be very bad for the European economy."

The pact has been effectively suspended since last year when EU ministers agreed to let EU heavyweights France  and Germany off the hook despite repeated breaches of its rules.

Barroso's predecessor as commission head Romano Prodi famously called an over-rigid interpretation of the pact "stupid."

Germany, the European Union's largest economy, is also calling for a revision to national deficit calculations to exclude certain payments into the EU coffers.

Barroso however was cool to the suggestion that some expenses not be counted when calculating national public deficits.

"If people think that is is by increasing expenses that more growth is created, they are fooling themselves," he said, adding low interest rates were the best way to bring about growth.