BRUSSELS (MNI) – Tricky sovereignty issues will take centre stage
Friday when European policy-makers gather here to debate ways to
enhance economic governance.

The first meeting of European Council President Herman Van Rompuy’s
task force aims to improve crisis management and budget coordination
among the 27 European Union members.

After market concerns about high debt levels in many European
states rattled the euro, leaders of the 27 European Union members asked
Van Rompuy propose economic governance reforms in order to prevent
similar crises in the future.

But achieving a meaningful agreement could be difficult, as some
countries favour stricter rules and greater integration, while others
worry about infringement of their national sovereignty.

Van Rompuy’s task force will produce an intermediate report for the
June 17 EU leaders’ summit and will finalise it for their summit in
October, his office said.

European Central Bank President Jean-Claude Trichet, European
Commissioner for Economic and Monetary Affairs Olli Rehn and
representatives from the finance ministries of the EU members are to
attend the meeting.

The task force aims to set out “the measures needed to reach the
objectives of an improved crisis resolution framework and better
budgetary discipline,” the European Council said in a statement.

The EU already has a set of fiscal rules in its Stability and
Growth Pact, which stipulates that a country’s budget deficit must be
less than 3% of GDP and its general government debt limited to 60%.

But the impact of the financial crisis and lax enforcement of the
rules left many of the countries with budget deficits well above these
limits. Greece is the worst offender, with a budget deficit of 13.6% of
GDP.

Last week the Commission suggested that the EU members coordinate
the timing of their budgets and open them up for greater peer review in
order to strengthen the policing of the budget rules.

It also proposed that the EU executive should assess the broad
outline of the national budgets and make recommendations on how they
could be improved.

Those plans are said to be strongly opposed by the UK, France,
Austria and Sweden. UK Chancellor of the Exchequer George Osborne told
reporters earlier this week that “national governments remain
paramount.”

The German government is set to propose that the other EU countries
follow its example in fixing a budget deficit limit in its national
constitution.

The ministers are also likely to discuss Germany’s ban on the
short-selling of some Eurozone government bonds, credit default swaps
and German financial companies, which shocked the markets and the
country’s European partners when it was announced late Tuesday.

After what is being billed as a “brain-storming” session, Van
Rompuy is to give a press conference at 1500 GMT.

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

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