FRANKFURT (MNI) – Public expenditures should, in the future, not
exceed growth in GDP, according to a new “fundamental principle” of
European budgetary policy that European Monetary Affairs Commissioner
Olli Rehn wants to implement, the German business daily Handelsblatt
reported Friday, citing an internal Commission document.
Overly indebted European states should reduce the growth in public
spending to a pace “clearly below” economic growth, the document said.
Picking up on a story that first broke Thursday, Handelsblatt said
that in the worst case, fiscal offenders would have to place an
interest-bearing deposit of 0.2% of GDP in Brussels. The money would be
paid back at the earliest once the sanctioned country got its expenses
under control.
Rehn is also proposing a new rule that would penalize countries
that repeatedly flout the Commission’s warnings on economic and budget
policies. In the future, Eurozone states would pay a fine of 0.1% of GDP
to other EMU states if they failed to heed warnings about excessive
balance of payment deficits or other undesirable economic developments,
the paper said.
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