–EMU Fin Mins To Set Up Permanent Crisis Resolution Tool
–EU Juncker Says Portugal Budget Plan Is On Right Track

MADRID (MNI) – Eurozone finance ministers Friday agreed to
strengthen budget enforcement rules and set up a permanent crisis
resolution tool so they will be prepared if more cases like the one in
Greece should arise.

“We have to be more careful when it comes to the preparation of the
annual budgets,” Jean-Claude Juncker, the Eurogroup President and
Luxembourg Prime Minister, told reporters at a press conference here
following a meeting of the EMU finance ministers.

“It makes sense to discuss among finance ministers the broad lines”
of national budgets before they are formally submitted to national
parliaments, Juncker said.

The European Commission — which will make a formal proposal in
May– has proposed a three-pronged approach to reinforcing the rules:
better application of the stability and growth pact budget rules, deeper
and broader surveillance, and a permanent crisis resolution mechanism to
enable it to deal with situations like the one in Greece.

The Eurozone countries already follow rules, set out in the
Stability and Growth Pact, which is intended to limit deficits and debt.
But there’s a consensus that these rules need to be strengthened given
that currently most EMU countries – including all the largest ones —
are out of compliance, due in part to stimulus spending during the
recession. The worst offender is Greece, whose budget deficit is more
than four times the EU’s stipulated 3%-of-GDP limit.

Olli Rehn, the European Commissioner for Economic and Monetary
Affairs, who presented the Commission’s proposals to finance ministers,
said, “we had a very constructive discussion on how to reinforce the
Stability and Growth Pact.”

“The Commission is the guardian of the treaty,” he said, adding
that the EU’s executive arm would use its right to enforce the rules.

Juncker said the ministers agreed it “would be better to have
stricter rules concerning the trend in public debt.”

REDUCING COMPETITIVE DIFFERENCES KEY

The ministers also discussed how to reduce differences in
competitiveness among the currency union’s members and agreed to focus
on the deficit countries first, Juncker said.

“Yes, any imbalances should be corrected, but we have to start by
correcting the deficits,” he said.

He added that countries with big trade surpluses, such as Germany,
are “a genuine cause for concern,” but “this is not the priority.”

“The most pressing and urgent need is in the countries with weak
competitiveness and current account deficits… that’s indeed where
corrective action must be taken,” Juncker said.

PORTUGAL BUDGET ON RIGHT TRACK

Rehn said the stability programme of Portugal is “ambitious and
quite concrete,” but that he saw risks to it, particularly in the
short-term.

“If these risks materialise, then our clear recommendation is that
Portugal needs to adopt new [measures] of fiscal consolidation,” he
said.

He said the Portuguese government understands the Commission’s
position and is ready to adopt new measures should the need arise.

Juncker said Portugal is “on the right track.”

–Madrid: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]