EU to review national budgets under commission plans

EU Observer (Link) - Andrew Willis (April 15, 2010)

The budgets of eurozone members could first need EU approval before being then being passed on to national parliaments, under radical new plans to be presented by the European Commission this May.

The controversial suggestion drives right to the heart of questions of national sovereignty and is likely to produce heated debate when discussed by the group�s finance ministers this Friday (16 April) in Madrid.

Greece�s ongoing fiscal crisis has increased member state appetite for greater budgetary surveillance however, with the EU executive confident its proposals will find a favourable audience.

Speaking at a debate on Thursday organised by The European Policy Centre, a Brussels-based think tank, EU economy commissioner Olli Rehn gave an indication of the plan�s current details, which have yet to be finalised.

�We should use the first months of the year, say January to July, to request draft national budgets,� he said.

�Not budget-line by budget-line ...but the overall budget, so that the commission would analyse and the eurogroup [of euro area finance ministers] would make a peer review and recommendations on national budgets, before they are presented to national parliaments,� he added.

The Finnish politician with a passion for football repeatedly referred to Article 136 of the EU�s new Lisbon Treaty during his discourse, under which euro area members can vote by qualified majority on measures �to strengthen the co-ordination and surveillance of their budgetary discipline.�

Analysts suggest eventual proposals allowing the commission and eurogroup members to issue �opinions� rather than formally �approve� member state budgets are far more likely to win member state support.

�There would be significant resistance from a number of countries if there is a perception that decisions on national budgets are shifting to the EU level,� the European Policy Centre�s chief economist, Fabian Zuleeg, told this website after the debate.

�There could also be legal issues in countries such as Germany,� he added.

Enforcing the pact

As well as stepping up ex-ante measures to ensure EU member states obey the bloc�s budgetary rules, laid out in the Stability and Growth Pact, the commission would also like to see a toughening up of the pact�s �incentives of compliance.�

While sanctions such as fines are technically possible under the current set of rules, they have never been issued.

Small member states have also suggested that the rules have been applied to them more rigorously than larger countries, with French and German breaches resulting in a watering down of the pact�s rules in 2005, to allow greater flexibility.

�It is worth reflecting whether some of the possible incentives of compliance, I don�t mean penalties, could be triggered automatically,� said Mr Rehn. �This would avoid an excessive political game with the rules.�