Van Rompuy: National parliaments are EU institutions

He noted that decisions by one national parliament - be it in Germany, Ireland, Slovakia or Portugal - are now being watched all over Europe when it comes to approving tax-payer funded bail-outs or adopting deficit reduction measures.

"Maybe not formally speaking, but at least politically speaking, all national parliaments have become, in a way, European institutions," Van Rompuy said.

Sovereignty

This development also comes at the expense of some sovereignty. "National parliaments keep their budgetary sovereignty, at least as long as national policies do not threaten the financial stability of the whole. To prevent that, countries in excessive deficit will conclude a 'contract' with the European Commission to bring down the deficit below the 3 percent ceiling (of gross domestic product)."

But deficits are not the only area where parliaments have to take into account the EU and other member states: economic reforms such as in the labour market "have a major impact on the rest of the union."

"The commission and other euro area member states have to be consulted before adoption of any major fiscal or economic policy reform with potential spill-over effects, so as to allow for an assessment of possible impact on the euro area as a whole," Van Rompuy explained, adding that it is the responsibility of national parliaments to "adapt" to this new situation.

He encouraged national MPs to speak to their counterparts from other member states, as well as to euro-deputies.

"As an outsider, I sometimes have the impression that the European Parliament and the national parliaments live in different worlds: the one always pushing for more integration, the others focussing on domestic issues and pulling the brakes," he noted.

The crisis has brought about a new level of interdependence and co-operation, Van Rompuy stressed, summing it up under the slogan "Europe is domestic policy."

But some national MPs disagreed.

Bill Cash, a Conservative from the British House of Commons, flatly rejected Van Rompuy's assertion that national parliaments have become EU institutions: "This is not the case. Taxation and spending belong to national electees, based on national political platforms," he said.

A Greek parliamentarian, Valeras Athanasiou, was less concerned about the institutional debate as he was about the consequences of applying debt and deficit reduction measures at a time of deep recession in southern countries.

"This destroys the lives of our people. We cannot go on with Germans pressured to pay more and Greek people afraid of having to do more and more to get the financial assistance," he said.

But EU commission chief Jose Manuel Barroso, also present at the debate, said that what was needed now in Greece was for "leaders to speak the truth and confront people with the alternatives." Fiscal stimulus is not the solution, with markets watching every move, but "smart fiscal consolidation", he said, meaning more austerity.