Tuesday

28th Feb 2017

EU agrees controversial peer review of national budgets

  • Member states could now end up looking at each others' revenue and expenditure plans (Photo: ansik)

EU finance ministers have reached broad agreement on a controversial plan to review each others' national budgets, together with earlier sanctions for member states that break the bloc's fiscal rules.

Also meeting in Luxembourg on Monday (7 June), an earlier gathering of euro area finance ministers approved the principle component of the zone's unprecedented €750 billion rescue mechanism.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Speaking to journalists after chairing his second taskforce meeting on economic governance with EU27 finance officials, most of them ministers, European Council President Herman Van Rompuy said governments had agreed to show their national budgets to each other and to the European Commission before seeking national parliamentary approval.

Originally put forward by the commission in May, the pre-vetting of national budgets by Brussels had previously met with stern opposition from a number of capitals including Berlin, London and Stockholm.

Under the new system, which still needs final approval from EU leaders, each government will present its broad estimates for growth, inflation, revenue and expenditure levels in the spring, roughly six months before national budgets go through parliaments.

Any government planning to run a deficit "will have to justify itself to its peers" on why this should be allowed, said Mr Van Rompuy, adding that members with debt levels above 60 percent of GDP would come in for even tougher scrutiny.

After the meeting, British officials underlined the primary role of national parliaments however, in an indication that precise details still need to be worked out.

Sanctions

The taskforce, set up by EU leaders in March, also agreed on the need for earlier and more "graduated" sanctions for states that break the bloc's budgetary rules - known as the Stability and Growth Pact.

The pact sets out maximum deficit and debt thresholds of three and 60 percent of GDP, respectively, with possible fines for overspending member states of up to 0.5 percent of GDP, although in practice the fines have never been levied.

In future, governments could "get into trouble" with their peers even before their deficits reached the three percent threshold, said Mr Van Rompuy.

"Up to now, you only got fined for driving through the red light of the three percent," the former Belgian prime minister told journalists. "From now on, you could also be in trouble for crossing the orange light."

Recently floated sanctions ideas have ranged from reduced EU funding to a loss of voting rights for ministers attending EU meetings in Brussels. Monday's talks primarily concentrated on financial sanctions, said Mr Van Rompuy, as non-financial sanctions would involve changing the EU treaty.

A number of EU states have raised objections to a withdrawal of EU structural funds as a form of punishment, however.

"We think that if there are to be sanctions, they should be of a universal character. It can't be, for example, taking away structural funds, because these are reserved only for some [of the poorest] EU countries," Poland's Europe minister, Mikolaj Dowgielewicz, told the Polish press agency, PAP, in an exclusive interview.

Eurozone bail-out

Earlier on Monday evening, euro area finance ministers reached an agreement on a €440 billion "special purpose vehicle" (SPV) - the main component of a massive eurozone support mechanism hastily agreed by EU leaders last month as Greece's debt crisis threatened to spread to other members of the single currency.

The SPV will be based in Luxembourg and will issue debt on capital markets, backed by individual guarantees provided by all 16 members of the eurozone. The money raised in this way can then be lent to struggling eurozone administrations, but only after a restructuring programme is agreed.

"There is no uncertainty left  ... about the ability to provide support," EU economy commissioner Olli Rehn said after the meeting, just hours after the euro currency touched another four-year low versus the dollar before gradually recovering.

Greece and creditors break bailout deadlock

Athens agreed on budget cuts worth up to €3.6 billion and extracted some concessions from creditors, but the IMF warned the package might not be enough.

EU ready to challenge US border tax

The EU is willing to fight any attempt by the Trump administration to impose border tax on imports, says jobs commissioner Jyrki Katainen.

News in Brief

  1. Le Pen party in new EU fraud allegations
  2. May to end rights of EU nationals after Article 50 triggered
  3. Nato warns against Armenia-Azerbaijan 'escalation'
  4. EU: No military solution to Nagorno-Karabakh war
  5. EU adopts visa-free brake mechanism
  6. Trump and Brexit drew on same resources
  7. Romanian protestors form EU flag at anti-government rally
  8. Over 3,500 attacks on refugees in Germany: report

Stakeholders' Highlights

  1. UNICEFA Deadly Journey for Children: The Migration Route From North Africa to Europe
  2. International Partnership for Human RightsFreedom of Association and Expression Under Threat in Kazakhstan
  3. QS World MBA TourMeet with Leading International Business Schools in Brussels on March 6th
  4. EURORDISJoin Rare Disease Day and Help Advocate for More Research on Rare Diseases
  5. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  6. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  7. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  8. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  9. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  10. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  11. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  12. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen