Wednesday

17th Aug 2022

Finance ministers cautious over budget proposals

  • Brussels is calling for greater budgetary scrutiny (Photo: Generation X-Ray)

EU finance ministers meeting in Madrid over the weekend (16-18 April) expressed caution regarding upcoming European Commission proposals on greater budgetary surveillance.

Under the plans, to be presented in full on 12 May, euro area member states and the commission would engage in a system of "peer review" so that national budgets would be subject to "systematic and rigorous assessments," before then being passed on to national parliaments for approval, explained EU economy commissioner Olli Rehn.

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"Remedial actions" would then be taken if necessary, the Finnish politician told the gathering of European financial heavyweights, drawing support from Luxembourg's Prime Minister Jean-Claude Juncker.

"It makes sense to discuss among the finance ministers the broad lines of the budget before these budgets are introduced in the parliamentary procedure," said Mr Juncker, who chairs the monthly meetings of eurozone finance ministers.

A number of other member states were more cautious however, concerned that plans could erode national parliamentary control over domestic budgets.

Joerg Asmussen, Germany's deputy finance minister, said it was "quite clear that national budget authority has to remain unrestricted, although we are obviously subject to the rules of the Stability and Growth Pact."

The pact, a system of rules limiting EU deficits to three percent, has been widely flouted by member states in recent years, leading to the current fiscal difficulties seen in several European countries, in particular Greece.

Spanish finance minister Elena Salgado, whose country currently holds the EU's rotating presidency, was also muted in her support for the commission's budgetary proposals, again highlighting the need to preserve the role of national parliaments.

"They are not going to substitute the decisions made by national parliaments," she said. "Nation states are complicated and budgets are complicated."

Bank levy

The creation of a bank levy that could create reserve funds for future bail-outs was also among the ideas discussed by the finance meeting, which included central bankers.

The swathe of European bank rescues which followed the financial crisis, largely funded by the taxpayer, has lead to growing calls for the industry to stump up for some of the costs.

The meeting's attendees failed to agree on a specific measure however, despite a broad consensus that the EU needs to find a better way to deal with aid to the banking sector.

European Central Bank President Jean-Claude Trichet said the idea of a bank levy called for "prudent steps," while Mr Rehn said further discussion was needed.

Ms Salgado warned that a "level playing field at the international level" would be required if the idea was to work, adding that the creation of an emergency cash reserve could lead to banks increasing their risky behaviour.

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