* Countries must reform first, then get extra time - Rehn
* All euro zone countries agreed fiscal rules need no change
* Ministers plead for flexibility within current rules
* Discussions bargaining chip in EU top job decision (Recasts with timing of reforms)
By Annika Breidthardt and Ingrid Melander
LUXEMBOURG, June 19 (Reuters) - The European Union could be flexible about the time members need to fix their budgets if they reform to boost growth, but it must first have proof such efforts are taking place, EU policymakers said on Thursday.
Euro zone finance ministers, meeting in Luxembourg, agreed the Stability and Growth Pact need not be changed to allow for such flexibility of the EU’s fiscal rules.
The Stability and Growth Pact limits government deficits to 3 percent of gross domestic product and public debt to 60 percent of GDP. The pact also spells out how governments have to put their finances in order if they exceed the limits and when they can be granted leeway.
EU Economic and Monetary Affairs Commissioner Olli Rehn said that countries should start implementing reforms first, before getting more time to cut their deficits to within EU limits.
“I would be in favour of looking into this interrelation between fiscal consolidation and structural reforms, but only so that we can first verify that structural reforms are really moving forward and then see if this would justify some extension in the correction deadline,” Rehn told a news conference after the ministers’ meeting.
The chairman of euro zone ministers Jeroen Dijsselbloem said that reforms and budget consolidation should be linked. While there was agreement no change to the rules was needed, he said, the ministers would see if they can be made simpler.
“All the ministers stressed the importance to stick to the rules as they are now,” he told a news conference. “At the end of the year... we will look at whether we can make them less complex.”
The existing EU rules allow for slower budget consolidation if a country makes investments or undertakes structural reforms. But policy-makers worry that more time for deficit cuts may not bring about the desired effects because reforms are postponed.
Their concerns were sparked by France, which in exchange for reform promises was given two extra years until the end of 2015 to bring its budget deficit below 3 percent of GDP.
The reforms did not go as far as expected and France will struggle to meet even the extended deadline.
EU policy-makers have therefore thought of reversing the order, so first a country must implement reforms, then the EU could grant it more time on deficit reduction.
French Finance Minister Michel Sapin told reporters that Paris was not pleading for a change of the rules or more time to meet the targets.
“But we need to find the right rhythm for each of the member states, especially those facing more difficulties, so that the return to a good budgetary situation, to an orderly decrease of debt and the reduction of deficit take place in a way that is compatible with growth and the return to growth,” he said.
Rehn acknowledged that France had done a lot to reform its economy but added that the process remained “incomplete”.
Italy brought the issue of flexibility with consolidation of public finances under EU budget rules earlier this year when it said it wanted EU policies to better support growth.
Rome takes over the rotating six-month presidency of the European Union in July and will set its agenda during that time.
The issue of slower consolidation in exchange for reforms has become a bargaining chip in talks on the new head of the EU executive arm, the European Commission. Italy is withholding its support for leading candidate Jean-Claude Juncker, seeking a more pro-growth interpretation of the rules.
Germany was long the most ardent defender of budget austerity, but its deputy chancellor Sigmar Gabriel suggested earlier this week that euro zone countries that carry out reforms should get more time to meet their fiscal goals.
He noted that Germany - now the growth engine of the euro zone - took time to meet deficit targets when it was carrying out reforms of its own. But the German government has since made clear that Gabriel did not imply a need to change the rules.
“The existing rules provide enough flexibility,” German Finance Minister Wolfgang Schaeuble said on Thursday. “We don’t need to change the rules, we have to stick to them,” he said.
“Solid financing and structural reforms are two necessary conditions for sustainable growth.” (Additional reporting by Martin Santa and Tom Koerkemeier in Luxembourg and Jan Strupczewski in Brussels; Writing by Annika Breidthardt; Editing by Tom Heneghan)