Deal to give EU powers over budgets

Wide powers for the EU to guide and fashion national budgets of countries with big deficits and those emerging from bailouts have been finally agreed in Brussels.

A promise to study eurobonds and how national debts could be shared by all member states is included in the package.

Agreement on the so called “two-pack” was finally brokered between the member states and the European Parliament by Irish officials, who hold the EU presidency.

Welcomed as a “key piece of the eurozone’s economic architecture” by Finance Minister Michael Noonan, it was criticised by Dublin MEP Paul Murphy as attacking the Government’s control over national budgets.

The head of Ireland’s EU representation office ambassador Rory Montgomery said the issue of striking a balance between national budgetary procedures and democratic accountability was a very delicate question.

“We all have our own processes in the member states and for public opinion, the power over the budget is fundamentally important but there is an enormous interdependence between member states and the compromise reached strikes a balance.”

The “two-pack”, introduced at the behest of Germany, is designed to ensure countries do not spend more than they take in in taxes in the future but also establish a framework where governments must give a detailed outline of their intended spending that needs to be approved by the European Commission in advance.

The Socialist group, which the Labour party is a member of, were anxious to balance budgetary discipline with ensuring that any cuts made in spending did not harm education and healthcare or damage investments with growth potential.

As a result the country- by-country budget assessments will be more comprehensive than originally proposed, with countries having to detail which of their investments have growth and jobs potential, and their deficit reduction timetables can be adjusted if there are exceptional circumstances or in severe economic downturns.

The legislation is designed to create a balance in eurozone economies and the commission will consider if one country’s proposed national budget will have a detrimental effect on that of another.

The deal will now have to be approved at a sitting of the full Parliament next month and the council before becoming law.