EU Commission cracks down on spiralling debt
THE European Commission proposed new economic rules yesterday that would include fines and loss of EU funding for countries that keep running up deficits.
Olli Rehn, the European commissioner for economic and monetary affairs, said the recession and the near-bankruptcy of Greece exposed the interdependence of national economies and the vulnerability of individual governments.
"It is high time to reinforce our economic union" by coordinating austerity plans across the EU, closing gaps in competitiveness and increasing budgetary discipline, said Rehn.
German Chancellor Angela Merkel wants to amend the EU treaty to make it possible to deny persistent overspenders voting rights in the EU.
Other countries strenuously oppose that.
Rehn suggested that if a eurozone nation snubs reforms, it should be forced to put an unspecified amount of money in an interest-bearing account.
The funds would be released if that country's budget is back in order. Rehn said he expects the EU finance ministers to approve a strict budget timetable next month. It would require governments to say every April what sort of budget they plan for the next year, enabling the European Commission to make corrections, if they were needed.
He also proposed that the EU be given the power to deny countries subsidies for development, and other purposes. To date, Rehn said, compliance with economic policy goals has been feeble and good times have not been used to make savings.
This would mean that the Government could have to bail out farmers and fishermen if Brussels goes ahead and if Ireland doesn't meet its targets.
The bloc's economics chief yesterday set out a range of sanctions he says he will impose on overspenders in a move to reassure markets and investors that Europe is ready to crack down on spiralling debt levels.
"The suspension concerns only transfers from the EU budget to the government concerned, and not the final beneficiaries," Olli Rehn told reporters in Brussels. "Governments will still be obliged to respect their commitment to the funds."
A spokesperson for the Department of Finance said, "These proposals are still very much subject to discussion and negotiation at ministerial level."