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EU to seize more financial control

THE EUROPEAN Union is to gain dramatic new powers to control tax and spending in crisis-hit eurozone countries under a deal to save the currency.

Brussels will have to agree the national budgets of heavily indebted countries under a deal to be signed tomorrow at a summit in the city.

The move will mean Greece losing control over its own budget after Germany and the International Monetary Fund laid down increasingly harsh conditions for the indebted nation to receive its second €119bn eurozone bailout.

Christine Lagarde, the managing director of the IMF, yesterday revealed that a "fiscal compact" was set to be signed by European Union leaders at the crucial leaders' summit tomorrow.

"In addition to having a monetary zone, the eurozone needs to develop this fiscal consolidation compact that is currently under work and that we hope will be validated on Monday at the leaders summit."

A leaked EU document revealed German plans for Greece to agree all its spending plans with a eurozone "budget commissioner". The commissioner would have the power to veto tax and spending plans.

The scheme sparked anger in Athens last night. Anna Diamantopoulou, the education minister and a former EU commissioner, described the idea as "the product of a sick imagination" in an interview with local television.

And the European Union's executive body is also against the calls from Germany.

The European Commission said yesterday that "executive tasks must remain the full responsibility of the Greek government".

Monday's meeting will also see European leaders discuss ways to help their economies grow amid fears that the continent may slide back into recession this year.

While Germany, the continent's largest economy, is calling for budget cuts and greater fiscal discipline, the IMF and others warn that such austerity could "strangle" growth.

"Some countries have to go full-speed ahead to do this fiscal consolidation, but other countries have space. They should explore what to do... in order to help themselves. It has to be tailor-made."

Tim Geithner, the American treasury secretary, has also warned of the risk that austerity could lead to a recessionary "cycle".

"There is a risk that every disappointment in growth will be met with an austerity that will feed the decline, and that is a cycle you have to arrest to solve financial crises," Mr Geithner said.

As Europe's leaders plan to bind Europe's economies closer together, Tory eurosceptics in the UK are to put pressure on their leader to harness a unique "block opt-out" which will allow the UK to withdraw from a raft of laws already ceded to the EU.

The mechanism would let Britain free itself from initiatives such as the European Arrest Warrants (EAWs) and greater sharing of DNA data of British nationals with foreign police forces.

It would also thwart plans to give the European Court of Justice greater jurisdiction over British courts.

© Telegraph

Sunday Independent