EU FINANCE ministers have agreed to toughen the surveillance of European budget rules, but MEPs have signalled tough talks on the final package by tabling more than 2,000 amendments to draft legislation.
Although Hungary’s rotating presidency of the EU declared the deal to be “historic”, it was criticised by European Central Bank chief Jean-Claude Trichet.
“We continue to think that the improvement in governance that is presently envisaged is in our opinion insufficient to draw the lessons from the crisis,” he said.
The new system is designed to strengthen the EU Stability and Growth Pact, which failed to prevent the acute build-up of pressures that led Ireland and Greece to seek bailouts.
While the pact was watered down in the middle of the last decade, the new rules are designed to prevent any repeat of the sovereign debt crisis by making it easier to punish countries which breach EU debt and deficit limits.
To become law, the legislation is still subject to a tripartite “co-decision” negotiation between the European Parliament, the European Commission and the Council of EU Governments.
While EU leaders want the legislation to be enacted in June, Mr Trichet has called on MEPs to ensure the proposal is toughened so that it amounts to a “quantum leap” in economic governance.
The commission’s power to impose financial penalties against rule-breakers will be swifter and more automatic, although EU governments retain an element of political discretion.
Graduated penalties would be imposed earlier in the EU excessive-deficit procedure and greater emphasis is placed on public debt reduction.
“A non-interest-bearing deposit amounting to 0.2 per cent of GDP may be imposed already when the decision has been taken to subject a country to the excessive deficit procedure,” the ministers said.
“If the council’s recommendation for correcting the deficit is not followed, a fine will be imposed.
“Further non-compliance will result in the sanction being stepped up.”
The new system also expands the reach of economic surveillance.
It embraces an “alert mechanism” based on a “scorecard” to detect excessive imbalances in property prices, personal debt and other key indicators.
The agreement on a “general approach” marks the culmination of a months-long initiative to strengthen the surveillance powers of the EU authorities.
The legislation has its origin in commission proposals and parallel work by a ministerial task force chaired by European Council president Herman Van Rompuy.
The sanctions regime foreseen by the Van Rompuy group was diluted last autumn at the behest of France and Germany, but that manoeuvre has been essentially reversed.
“To trigger a sanction more automatically than at present, a so-called reverse majority rule would be introduced, whereby the commission’s proposal for imposing a deposit or a fine would be considered adopted unless turned down by the council via a qualified majority,” the ministers said.
EU economics commissioner Olli Rehn declared himself “reasonably satisfied” with the outcome.
“In order to stop a sanction, basically you have to have a decision by a reverse qualified majority and you also have to explain the reasons.”
