Monday

25th Jul 2016

Brussels' new budget powers draw first rebuke

  • Belgian Prime Minister Elio Di Rupo (c) - the commission's warning was a rude awakening for his new government (Photo: fotospresidencia5)

The European Commission's sweeping new powers in budgetary oversight drew its first criticism on Thursday (12 January), when a Belgian minister said the EU institution lacks the democratic legitimacy to alter national spending plans.

"The commission is today going too far with its measures. Who knows [economic affairs commissioner] Olli Rehn? Who knows where he has come from and what he has done? Nobody. Yet he tells us how we should conduct economic policy. Europe has no democratic legitimacy to do that," Belgian enterprise minister Paul Magnette said in an interview with Flemish newspaper De Morgen.

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He said Belgium accepts that it has to get its budget deficit under the three percent of GDP required by euro rules, but "the margin to determine how we do it must remain free."

Philippe Maystadt, also a Belgian and the former head of the European Investment Bank, made similarly critical remarks the day before. He said the commission lacked the legitimacy and efficiency to directly penalise a member state for its budget.

The commission caused a flurry in Belgian political circles over the weekend by warning that the country needed to curb this year's spending. Rehn suggested the government's calculations that the budget deficit for 2012 would be 2.8 percent were too optimistic and asked for a cut of between €1.2 billion and €2 billion.

Belgium eventually settled on freezing €1.3 billion in spending, a move that saw it escape the threat of monetary sanctions on Wednesday (11 January) when the commission assessed the matter.

But the country's run-in was a foretaste of what is to come under the new rules - in place since mid December - designed to stop the eurozone debt crisis from being repeated.

The rules require countries to submit their annual budgets to the commission for review with fines of up to 0.2 percent of GDP for breaches of the deficit limits.

Hungary - a non-euro member - was on Wednesday told it could lose millions of euros in EU funds if it does not toe the budget line.

Although the so-called six-pack of laws went through the ordinary legislative channels in Brussels - with much back and forth between MEPs and member states about the nature of the sanctions system - commission officials and others have long warned that the power of the rules has been underestimated.

Underlining the point earlier this week, Rehn said that this year would see a "profound transformation" in economic governance.

Responding to Magnette's criticism, a commission spokesperson Thursday said: "We held a democratic debate on this with the European Parliament and the 27 governments of the EU, including the Belgian government."

"The European Commission does not have a political agenda when it tries to apply its rules. Its decisions are based on rigorous economic analysis."

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