The European Commission has said the failure to implement sanctions against France and Germany according to the terms of the stability and growth pact could hit eurozone confidence.
EC economic official Klaus Regling said: "The recent setback in the application of the stability and growth pact could lead to higher deficits. That could therefore affect confidence".
Regling was presenting the commission's latest quarterly euro area report, and also said the impact of the rise of the euro should not be overstated.