–EU Exec Wants EU Members To Align Timing Of National Budgets

BRUSSELS (MNI) – The European Commission Wednesday unveiled plans
to toughen up economic governance and align budget planning in the 27
European Union countries in a bid to curb high levels of debt and
prevent a repeat of the current crisis.

The plans – which will be discussed by European Union finance
ministers at their meeting next week – include the alignment of the
timings of national budget planning through the institution of a
“European Semester” beginning next year, increased peer review of
budgets among the 16 Eurozone countries, and tougher penalties for
repeat rule-breakers.

“Coordination of fiscal policy has to be conducted in advance, in
order to ensure that national budgets are consistent with the European
dimension, that they don’t put at risk the stability of the other member
states,” European Commissioner for Economic and Monetary Affairs, Olli
Rehn said.

“This can be done in the framework of a European economic semester.
For the euro area it means deeper and broader surveillance, in
particular with regard to macroeconomic imbalances,” Rehn added.

The European Union already has a set of budget rules, known as the
Stability and Growth Pact, which require EU countries to limit their
budget deficits to 3% of their gross domestic product and their
government debts to 60%.

But lax enforcement and the impact of the economic crisis led to a
build up of debts and deficits in many countries and prompted the
markets to fear a debt default, in particular in Greece, Portugal and
Spain.

Last weekend, European finance ministers – prompted by severe
market turbulence – outlined plans for a E750 billion fund to support
Eurozone countries with high debts and deficits.

The Commission Wednesday said that “it considers it to be a first
priority to make the European stabilisation mechanism decided by ECOFIN
May 9 fully operational.”

It said it would then make a proposal for a permanent crisis
resolution mechanism, based on the May 9 decision.

Alongside that, the Commission said, efforts should be made to more
closely coordinate economic governance.

“Member States would benefit from early coordination at the
European level as they prepare their national budgets and national
reform programmes,” the Commission proposal said.

“Early guidance at the beginning of each year from the European
Council on economic policies would facilitate the preparation of
Stability and Convergence Programmes and National Reform Programmes,” it
said.

The proposal said that more focus should be given to the public
debt metric in order “to ensure the long-term sustainability of public
finances.”

“Recurrent breaches of the Pact should be subjected to a more
expeditious treatment,” it said.

The Commission said that, given the severity of the current crisis,
it is necessary to make “swift progress” on implementing the new rules.
It wants to start the first European Semester at the beginning of 2011,
it said.

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

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