Commission: National budgets in eurozone should be peer reviewed

NATIONAL budgets should be peer reviewed by finance ministers from other eurozone countries before they are adopted by national parliaments, according to the European Commission.

This is one of a raft of measures designed to prevent future crises, such as that in Greece and are being discussed by EU finance ministers at a two-day meeting in Madrid.

They also considered arrangements for the proposed €45 billion loan from the eurozone and the IMF to Greece and said that they will agree common conditions for Athens.

Teams from the European Commission and the IMF are to go to Athens on Monday to discuss arrangements and the Greek prime minister George Papandreou gave the firmest indication yet he will make a formal request for the loan when speaking to parliament.

Economic Commissioner Ollie Rehn said the main lessons from the Greek situation is the need to reinforce surveillance and policy coordination within the eurozone.

He plans to propose that the commission receives the broad outlines of each country’s draft budget with fiscal balances before it is approved by their national parliament.

The draft would be peer reviewed by the other eurozone states and any recommendations agreed by a majority of the ministers would be binding on that country.

“We should integrate the European dimension into the national budget earlier, enough to make a difference,” he said. He added he will produce proposals on May 12.

Luxembourg prime minister and head of the eurozone Mr Juncker said he supported the proposal and did not see it as a sovereignty issue. “We have to be more careful when it comes to annual budgets”, he said.

These will need the unanimous consent of the member states — something that is not a foregone conclusion as large countries like Germany may have reservations.

Greece is unlikely to make its request public until all arrangements are in place. It is unclear how long this will take as several governments have to pass legislation first, including Ireland, Germany and France.

A statement from the Greek government said their 2010 budget was on track and the deficit has declined by 39.2% compared to the same period the previous year, more than the target of 30.2% set in the EU’s Stability and Growth Pact. This was due to expenditure cuts of 3% and revenues rising by 9.7%.

However, analysts said the reform of tax and other measures do not take into account the further cuts that will be required for the next few years and that markets continued to be concerned about Greece’s ability to pay its debts.

This will have knock-on effects for other countries, including Ireland. This was seen earlier this week when the cost of borrowing money rose to its highest in several months for Ireland.