THE EU Commission and European Parliament are right to push for strong surveillance of national budgets, the man in charge of the EU "bailout" fund said in Dublin yesterday.
Klaus Regling, who co-authored a report on the Irish banking crisis, said he hoped the reformed Stability and Growth Pact (SGP) would be, "as strong as possible".
"I hope the commission and the parliament will be able to overcome government objections to the revised SGP," he told a meeting yesterday at the Institute for International and European Affairs.
Under the new proposals, governments would have to submit national budget plans to the EU at an early stage and the commission would provide reviews of member states' budget and economic policies.
"Depending on the nature of any imbalance identified, policy prescriptions would address fiscal, wage, macroeconomic and macro-prudential policy aspects," Dr Regling said.
He claimed the existence of EU financial supervision could have prevented the worst of the Irish credit bubble.
"I believe an EU regulator, if it had existed, could have told the Irish supervisors to do something about the housing bubble. The power was there but it wasn't used -- in Ireland or in the US or UK.
"They could have said to the banks, 'No more 110pc mortgages. You are not allowed to sell any worth more than 80pc of value,' but there was nobody to tell regulators to do that."
Dr Regling said he took some blame himself for not sounding stronger warnings, as the senior official in the commission's Economic and Financial Affairs department at the time. "The Irish attraction to property comes as a surprise to Germans," he said.
Dr Regling is chief executive of the European Financial Stability Fund (EFSF) which raised the loans for Ireland and is in negotiations with Portugal about a similar operation.
"When we raised the first €5bn for lending to Ireland, investors offered €45bn. That was the end of fears -- mostly in New York -- that the euro would disappear in the next three or four years, if investors were prepared to commit that much.
The EFSF plans to raise €16.5bn this year for loans to Ireland and €10bn next year. "It may depend on markets and Irish needs. The situation is reviewed every three months because economic and other conditions can change," he said.