MEMBERS OF the euro zone could have to pay millions of euro in fines if they do not get their fiscal houses in order, according to plans for the most sweeping changes in the European Union’s economic governance since the single currency was introduced.
The proposed legislation, to be presented next Wednesday by Olli Rehn, the European commissioner for economic and monetary affairs, would force euro zone members who consistently failed to bring down their public debt levels to pay 0.2 per cent of their gross domestic product into a non-interest bearing account, which could then be converted into a fine.
Other fines or penalty payments could also be imposed on member states that failed to keep their annual spending under control and those that failed to implement economic liberalisation programmes to improve competitiveness, according to sources briefed on the proposals and documents seen by the Financial Times.
The proposals have the backing of José Manuel Barroso, European Commission president.
They are the EU’s most ambitious attempt to reorder its economic governance since last spring’s debt crisis came close to destroying the single currency.
EU officials involved in the deliberations characterised them as being at the most stringent end of the range of measures under consideration in recent months.
The hurdles facing their implementation, however, remain high.
Herman Van Rompuy, president of the European Council, the body made up of the heads of all member governments, is heading a taskforce composed of national finance ministers.
This taskforce is looking at the same issues, and disagreements between member states over sanctions and fines remain intense.
Mr Van Rompuy brought forward the next meeting of his taskforce to Monday, just two days before Mr Rehn’s scheduled announcement.
The a move was seen by some in Brussels as an effort to pre-empt the commission’s proposals.
Mr Van Rompuy announced this week that he would submit his own draft to the taskforce at Monday’s meeting.
In spite of the institutional rivalry, Mr Rehn’s proposals appear to reflect a growing consensus between the two bodies.
This is true particularly regarding the need to improve monitoring and earlier identification of countries that are slipping into economic crisis.– Copyright The Financial Times Limited 2010
