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EU leaders plan fiscal changes weeks after treaty vote

EUROPE'S leaders have floated further treaty changes just weeks after Irish voters went to the polls to vote on the fiscal compact.

A seven-page plan devised by four of the EU's leaders and sent to Europe's capitals yesterday calls for "more enforceable" tax coordination.

The EU wants to create a banking and budget union to avoid local bank failures wreaking havoc across the 17-member currency zone.

Under the 10-year roadmap to be discussed at a summit of EU leaders tomorrow and Friday, banks would be supervised directly by the European Central Bank and EU-wide insurance funds would be set up to guarantee customer deposits and pay for failing lenders, backstopped by the ESM rescue fund.

National budgets would come under the control of a eurozone finance minister and governments' spending and borrowing levels would be capped. Budget ceilings could be raised only with the prior approval of eurozone finance ministers.

Europe Minister Lucinda Creighton said she was not worried about the suggestion. "We can certainly live with that," she said yesterday.

The document says that fleshing out the plan would require "a lot of further work, including possible changes to the EU treaties at some point in time".

But the document is short on measures to remedy the current malaise, which intensified on Monday after Cyprus applied for an EU bailout, the fifth eurozone country to do so in the last two years.

Spain is also battling over the terms of its own rescue loan, which the government wants to funnel direct to banks to avoid adding to its debt pile.

In the Dail yesterday, Taoiseach Enda Kenny came out in support of the Spanish position.

"I believe the time has come to allow the ESM (European Stability Mechanism) to fund banks directly, taking pressure off Europe's vulnerable sovereigns," Mr Kenny said.

German chancellor Angela Merkel said this week that pooling liabilities would be "economically wrong and counterproductive", dashing hopes in countries facing elevated borrowing costs.

Her position clashes with that of French president Fran├žois Hollande who supports eurobonds and wants to hand the ESM a banking licence to directly recapitalise cash-strapped lenders.

Mr Hollande and Mrs Merkel are due to meet in Paris tonight ahead of the summit.

Irish Independent