Commission to propose penalties that would cost taxpayer millions
THE European Commission will propose tomorrow that countries that break EU debt and competitiveness standards should face penalties, which could add up to hundreds of millions of euro in Ireland's case.
The new proposal would bring in the first automatic penalties to be imposed for failing to obey public finance rules.
Germany wants to go even further and suspend EU voting rights from persistent offenders -- a suggestion supported by European Central Bank president Jean-Claude Trichet.
The commission has indicated it will consider withholding regional and agricultural funding from errant states.
Mr Trichet called on the Irish Government to remain alert over the economy given the problems with the banking sector.
"In the case of Ireland, you have the additional issue of a very big financial sector. That is part of the challenges that the country has to cope with.
"Ireland has proved in the past that they were able to take up the difficulties and challenges they had to face," he went on.
In a letter to his counterparts, German Finance Minister Wolfgang Schaeuble called for structural fund payments to be suspended or permanently revoked for euro members failing to adhere to requirements .
Countries that twice ignore deficit-cutting recommendations or manipulate statistics should lose some of their EU voting rights for a year, Mr Schaeuble said.
That sanction would apply to votes on deficit proceedings against the country in question.
German MEP Sven Giegold said that Ireland now had a "moral responsibility" to change its tax policy and stop operating as a haven for tax evaders. His party wants Ireland to double its 12.5pc corporation tax, which is seen as key to the country's economic prospects.
"The situation of the Irish financial system is extremely worrying and is driving towards Greek conditions," he said in a joint statement with fellow MEP Markus Ferber.