Trichet dismisses 'historic' finance deal
EUROPE's finance ministers yesterday clinched a "historic" agreement on ways to enforce economic discipline on the 27 EU member states, but the European Central Bank boss Jean Claude Trichet dismissed the package as "insufficient".
The new measures, which still have to be approved by the European Parliament, will see countries fined if they fail to hit budget targets or reduce their public debt to agreed levels.
Countries will also face penalties if they neglect to address ballooning house prices, current account deficits or inflated wages.
Finance ministers began this week's talks in Brussels with 10 issues of disagreement, all of which have now been resolved. "This is a little bit of a historic moment," Swedish Finance Minister Anders Borg said yesterday.
Both the ECB and the European Commission had been pushing heavily for sanctions to be "automatic" but the agreed deal gives countries two chances to overturn possible sanctions.
The European Commission's economics chief Olli Rehn said he was "reasonably satisfied with the outcome", which he described as "very close" to the commission's original proposals but the ECB's Mr Trichet said the measures were "insufficient".
The European Parliament is also expected to push for tougher and more automatic sanctions, and members have already tabled some 2,000 amendments to the wording agreed yesterday.
But the move towards so-called "automaticity" is expected to be stringently resisted by most national governments in the final push to seal a binding agreement by June.
Yesterday's agreement also allows pension reforms to be offset in national accounts and private indebtedness taken into consideration before a country is fined -- changes made to placate Poland and Italy.
Economic governance has been on the table since the financial crisis broke, but pressure to bring stricter discipline to bear on euro-using nations intensified after the Greek bailout.
Governments have already agreed to hand over budget outlines and economic reform plans to the commission each April as part of the overhaul.
These will have to be scrutinised and signed off by the EU executive and neighbouring governments, who can make changes. The first round of submissions kicks off next month.
Finance ministers also agreed that they would donate the proceeds of the fines to the bloc's bailout fund, which is currently being tapped by Ireland.