EU budgets ‘need tighter surveillance’

THE European Commission is increasing pressure on member states to accept much tighter surveillance on their national budgets at EU level.

It may even suggest changing the rules to make it more difficult for member states to reject Commission recommendations on budgets.

Commission president Jose Manuel Barroso made a forceful plea to the European Parliament yesterday evening to support the proposals to reinforce economic governance in the EU.

“We need a stronger surveillance regime. That means one that is stricter, and broader, covering budgetary, macro-economic and structural policies – a regime that reflects the inter-dependence we all know is central to the European economy,” he told MEPs.

The changes, if accepted, will be the biggest made in the EU outside a new treaty, Mr Barroso has been reported to say. But some are known to want to go further, and make changes that would need changes to the treaty.

They include independent advisers to the EU and the European Central Bank that believe budget and spending rules should be reinforced to protect the euro.

This includes reversing the burden of proof, a Commission source said, so that if the Commission makes a recommendation, the council representing the member states would need a qualified majority to overturn it.

Economic Commissioner Olli Rehn is known to support such a change but acknowledges that it would require treaty change, which Germany supports, but many countries, including Ireland, are wary of.

The core of the proposals is that member states will have to submit substantial details on their proposed budgets at in the spring of the year before they are to take effect. The Commission will test them to see they conform to EU and national plans on debt and deficit reduction as well as against national targets for spending on items such as education, research and poverty reduction.

Member states are expected to include any recommendations in their completed budgets to go before their national parliaments. If they breach the extended Stability and Growth Pact the Commission will recommend action.

This could include having EU funding suspended and withdrawn or forcing governments to deposit money with the Commission which eurozone states could forfeit in the case of ongoing breaches.

Mr Barroso said that a pact with real teeth was needed. “The rules need to be strong enough to command respect. Without a more stringent system of incentives and sanctions, we will not reinforce economic governance in a credible way,” he said.

The Commission also wants a series of indicators to test macroeconomic balances such as labour costs, housing costs and borrowing. “We must have tools to detect macroeconomic imbalances among member states. Such imbalances weaken the cohesion of the EU and in particular of the euro area,” he said.