BRUSSELS, Belgium - European Union member states hope to finally agree on Wednesday a reformed set of budget rules after a long debate between Germany and France, the biggest economies in the bloc.

Finance ministers from the 27 members were to meet by video link from 1500 GMT, but their French and German colleagues got together in Paris on Tuesday to settle their remaining differences and clear the way for a compromise.

The tight fiscal straitjacket imposed on EU members in order to preserve the stability of the euro -- limiting countries' debt to 60 percent of GDP and public deficits to 3 percent -- was loosened during the Covid pandemic to allow greater state spending.

This was meant to be a temporary reprieve, but launched a two-year debate between countries led by Germany that wanted a return to rigorous controls and other led by France that wanted more flexibility to allow greater state spending to finance, for example, the transition to green energy or arms deliveries to Ukraine.

French finance minister Bruno Le Maire and his German counterpart Christian Lindner came to a compromise deal on Tuesday that would reconfirm the targets, but soften the rules for how quickly and a severely a country has to cut spending to get back within the debt and deficit parameters.

"Since there is an agreement between France and Germany ... I'm totally convinced that it should convince also the other members states," said Lindner. "The old rules were strict on paper but not on application."

Le Maire said that France and Germany, once on opposite sides of the debate were now "100 percent agreed", while the next biggest EU economy Italy was also on board, and predicted a political agreement among the full 27 member EU was not far off.

Time is running out for a deal -- if there are no changes the original stability pact, which was often breached with little in the way of consequences by members in the past, will come back into force on January 1.

Route back to stability

Failure to agree new rules would also damage the EU's credibility in the eyes of the financial markets.

If there is political agreement, the EU member states will seek agreement from the European Parliament to pass binding legislation before elections in June.

"We're getting close to a deal that will satisfy all the parties involved," a European diplomat told AFP in Brussels.

"What we have on the table today is a balanced approach. We think there's a chance to clinch this political agreement."

The draft text provides for rules more adapted to the particular situation of each country, allowing big spenders a slower route back to frugality.

Brussels is proposing that member states present their own adjustment trajectory over a period of at least four years in order to ensure the sustainability of their debt.

Reform and investment efforts would be rewarded by the possibility of extending this budgetary adjustment period to seven years, so that it is less brutal.

The targets would be linked to evolution of expenditure, an indicator considered by some more relevant than deficits, which can fluctuate according to the level of growth.

In order to satisfy Germany, however, countries with excessive deficits will be forced to make a minimum effort to reduce their deficit, which could be 0.5 percentage points per year.

Berlin also wants a public deficit target of 1.5 percent of GDP be assigned to the most indebted countries, in order to preserve a margin of safety in relation to the three percent ceiling.