Commission could police profligate states, says Van Rompuy
Brussels 'can tighten control' using existing Lisbon Treaty
EUROPEAN Council president Herman Van Rompuy says the European Commission could get major new powers to control member states' budgets and punish countries that break financial budget rules without the need for treaty changes and an Irish referendum.
On Monday, French President Nicolas Sarkozy and German Chancellor Angela Merkel said a new treaty was needed to toughen EU budget rules, and provide a long-term solution to the debt crisis.
Last night, however, Mr Van Rompuy circulated his own plans for greater European budgetary union to European leaders due to hold talks tomorrow and Friday.
The EC president will chair Friday's talks and was asked by European leaders to prepare a report ahead of the meeting. His proposals echo Franco-German demands for fast action to create shared budget rules for all eurozone countries, with harsh sanctions if rules are broken.
Under Mr Van Rompuy's plan, countries could temporarily lose the right to vote on EU issues, and would be subject to greater budgetary oversight if they were found guilty of overspending.
However, there are major differences between Mr Van Rompuy's and the Franco-German position. Mr Van Rompuy thinks the European Commission should oversee the new system, while France and Germany think new rules can be managed at an intergovernmental level.
He said greater budget co-operation could pave the way for the introduction of common borrowing in the form of euro bonds, an idea rejected by the "big two" euro nations.
For Ireland, the biggest difference is Mr Van Rompuy's claim that his proposals could be introduced without major changes to the Lisbon Treaty.
If true it would mean there is no requirement to hold an Irish referendum to sign off on the scheme. The Irish electorate's power to decide on EU rule changes is a worry and a frustration to many in Brussels.
However, Mr Van Rompuy's report says there may be no need for a lengthy Lisbon-style ratification process to bring in the changes he has flagged.
He said stricter fiscal rules could be enshrined in law through a change to protocol 12 of the current Lisbon Treaty, a quicker option than tearing up the treaty and starting over.
Under protocol 12, all countries are already obliged to keep their budget deficit at or under 3pc of GDP, and to keep debt at just 60pc of GDP.
The rules say states are obliged to report planned and actual deficits and their true levels of debt promptly and regularly to the European Commission, although there is no provision to punish countries that break the rules in the current wording.
Despite Mr Van Rompuy's claim, the French government said yesterday that it was already working on the treaty change option.
Yesterday, French Prime Minister Francois Fillon said his country should ratify the planned EU treaty changes by the end of next year -- despite the fact that the Franco-German plan will not even have been put to the rest of the European leadership until Friday.