EU FINANCE ministers followed a deal to open draft budgets in Brussels before parliament with an agreement to give new audit powers to Eurostat, the European Commission’s statistical arm.
As economics commissioner Olli Rehn indicated, Bulgaria would be the first country to face a Eurostat audit. He said the EU executive will next month publish proposals to flesh out a call for earlier financial sanctions when the euro rulebook is strengthened.
With new sanctions a core component of the agreement made on Monday night, some EU governments are already pushing for automatic penalties to ensure adherence with the fiscal rules which underpin the currency.
“We’re of the opinion that these sanctions have to kick in automatically,” said Luxembourg’s finance minister Luc Frieden as yesterday’s meeting ended. “If they were to be subjected to a political assessment, there would be too much of a risk of some states being treated different from others.”
Mr Frieden’s remarks imply that prime minister Jean-Claude Juncker, president of the euro group of finance ministers, wants the removal of political discretion from a new sanctions regime.
EU leaders will discuss the plan at their summer summit in Brussels next week, a meeting Mr Juncker will attend in his capacity as head of government.
The monthly finance ministers’ meeting yesterday took place against the backdrop of industrial action in Spain in protest at swingeing budget cuts. Spanish unions said 75 per cent of public sector workers went on strike to protest against the savings plan, although many hospitals, schools and government offices in Madrid reported few disruptions.
The government reported only 11 per cent absenteeism in the offices of the central government. Finance minister Elena Salgado, who chaired the meeting under Spain’s rotating presidency of the EU, said Madrid would take “any measures necessary” to meet its 6 per cent deficit target for 2011.
Ms Salgado also indicated that the EU countries will push ahead with plans for a banking levy after a meeting of G20 ministers failed last weekend to agree on a new compulsory tax.
“The EU must be proactive and determined in following that up,” she said, echoing the views of other ministers.
Mr Rehn said he will not hand down his final judgment on the Spanish cuts and on an austerity plan from the Portuguese government until next Tuesday, but offered encouragement.
“We welcome that both countries express the strong commitment and capacity to take substantial measures,” he said. However, he said it may not “always be correct to put Spain and Portugal in the same basket because they are independent countries which have different challenges”. Asked about the €80 billion austerity plan from German chancellor Angela Merkel, he sidestepped a question on whether it would be better to seek the stimulation of domestic demand from Berlin.
“The German measures which have been decided yesterday concern the years 2011 onwards and Germany is expected to meet the 3 per cent target of public sector deficit in 2013. It seems that this programme of consolidation measures will substantiate the target.”
Investors anxious about the expansion of the European debt crisis rushed to buy German debt yesterday, pushing the 10-year yield as low as 2.52 per cent – the lowest since at least 1989, the year the Berlin Wall fell.
European stocks declined for a third day, leaving the benchmark Stoxx Europe 600 Index 12 per cent below its year-to-date high. After falling below $1.19 on Monday, the euro was trading around $1.1927 yesterday.
KLAUS REGLING TO HEAD EUROPEAN RESCUE FUND
KLAUS REGLING, the man compiling one of the reports on the banking crisis for the Government, will head a European rescue fund charged with halting the spread of the debt crisis emanating from Greece.
Mr Regling, who is a German national and a former director general of the European Commissions economic and financial affairs unit, is expected to start in his role as chief executive officer of the European Financial Stability Facility on July 1st.
Luxembourg finance minister Luc Frieden signed an act yesterday legally establishing the fund. The fund, known by the acronym EFSF, will be based in Luxembourg and its board composed of representatives from euro- area governments which are to provide the €440 billion in national guarantees to backstop the 16-nation currency.
“Regling is one of the foremost experts in international and European finance,” Luxembourg prime minister Jean-Claude Juncker, who heads the group of euro-area finance ministers, said in the statement. “With him as CEO, the EFSF’s quality and credibility are secured from the start.” – (Bloomberg)
