Monday, 12 March 2012

New budget rules up for agreement

EU Observer reports that EU finance ministers are to sign a first agreement on laws that would strongly increase the power of the EU to instruct euro-zone countries on how to spend their national budgets.

Applying to the seventeen members of the single currency only, the two laws require that all national budgets be presented to the Commission for “assessment” at the same time—by 15 October at the latest, according to a draft of the agreement.

The Commission would have the power to ask for a revision of the budget if it considered it likely to lead to a breach of the rules underpinning the euro, which bind member-states to keeping minimal budget deficits.

The seventeen would be required to establish independent bodies and to base their national budgets on independent forecasts—a move designed to depoliticise the process of drawing up the budget in member-states by subjecting it to technocratic eyes. Countries already breaching the budget deficit rules will have to issue regular reports to Brussels and agree a “partnership programme” on how to get back on the right fiscal track.

Those either experiencing or at risk of “severe” difficulties with their finances, or those already in a bail-out scheme, will be subject to far more invasive monitoring. Essentially they would lose the authority for any kind of discretionary spending.

The draft rules would entitle the Commission to grill them on the “content and direction” of fiscal policy, while Brussels would be entitled to see sensitive information, such as information on the financial health of individual banks. Bailed-out euro members would remain under this hyper-surveillance regime until they have paid back at least three-quarters of the money lent to them.

Much of the draft, proposed by the Commission last November, is to be approved by finance ministers, but a clause that would have essentially forced a country to undergo a bail-out has been removed, said a contact close to the negotiations.

The laws come on top of six other budgetary surveillance laws applying to all twenty-seven member-states that came into force in December.

They form part of the EU’s attempt to make sure the present sovereign debt crisis will never happen again, although critics say the laws infringe on national democracy.

Following the ministers’ green light the draft will go to the EU Parliament, with real negotiations between the two sides expected to come in April, after the proposal has made its way through committee.

One of the sticky issues will be how much these laws should encompass what is in the fiscal discipline treaty, an intergovernmental document covering much of the same area, due to be signed by EU leaders in March. If the scope of these laws is too wide it would raise the awkward question—already to be heard sotto voce in Brussels—about the point of having the fiscal treaty at all.

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