Commission faces uphill battle over radical plans
THE European Commission will today announce radical proposals to tackle the debt crisis, but faces an uphill battle to convince member states to back the schemes.
Commission President Jose Manuel Barroso and Economics Commissioner Olli Rehn will jointly announce measures including plans for common "eurobonds" and a call for sweeping new powers to interfere in the budgets of member states.
The Commission can propose the measures but all member states must back the plans before they come into force. Germany and other rich countries remain bitterly opposed to some of the strategies to be outlined.
The Commission, however, is trying to convince them by stressing the disciplines it want to impose.
Mr Rehn said the Commission wanted new rules forcing all euro member states to adopt balanced budget rules, either in law or in their constitutions. Germany already has such a rule. He also wants to strip finance ministers of their budget planning powers, handing authority to independent technocratic "national fiscal councils".
"For euro area countries, we need to make sure that the national budgets are in line with the obligations of the Stability and Growth Pact before they are enacted," Mr Rehn said.
The Commission will be able to send budget inspectors into countries experiencing financial difficulties -- even if governments do not request aid -- under the plans. In some cases countries could be taken into a form of administration for repeatedly breaking budget rules. Some of the measures are designed to soften up Germany and other rich countries for the second element of the Commission's proposals.
These include plans for some form of shared borrowing mechanism that would allow euro countries to borrow at a single rate or close to a single interest rate.
"Any type of eurobonds would have to go in parallel, hand in hand, by a substantially reinforced fiscal surveillance and policy co-ordination," Mr Rehn said in Berlin yesterday.
Germany and other states footing the bailout bill are opposed. That's because they would pay more for their national debt but also because it would make them jointly responsible for the debts of other countries.
Germany is blocking calls for eurobonds and for the ECB to make a massive intervention in the markets to restore economic confidence. (Additional reporting Bloomberg)