THE EU Commission is seeking sweeping powers to compel euro states to cut their debt, a move that would require the Government to seek pre-approval from Brussels of the amount of borrowing in the annual budget.
As the European authorities take steps to avert any repeat of the Greek debt debacle, the commission’s plan to toughen budgetary surveillance means the Government’s “budget orientations” would be reviewed by the 15 other euro countries before they are unveiled in the Dáil.
Minister for Finance Brian Lenihan would have no veto when his counterparts in the euro group vote on the broad outlines of his budget proposal.
The commission’s plan would give finance ministers from the other euro countries the power to call for a new outline budget if they determine that the original borrowing plan could not realistically reduce the deficit in line with targets set by the EU executive.
The other ministers could also call for a new outline budget if the commission determines that the original proposal could damage the euro. In addition, the Government would face EU sanctions if the Minister were to go ahead with the first proposal, such as a suspension or withdrawal of funding from EU programmes.
The Government’s proposals for the balance of payments and the budget deficit would be reviewed under the plan. As such, the new plan would limit the Government’s room for manoeuvre when crafting its annual financial plan.
Under the existing surveillance system, shown to have failed as 13 of the euro countries built up deficits in excess of EU limits, annual budgets go to the European authorities after they are unveiled in parliament.
“We don’t want to fall into scrutiny of every single budget line. That’s not feasible,” said a senior commission official. “What we want is that the euro group would be able to assess the main budget orientations before they are presented to the national parliament.”
José Manuel Barroso, chief of the EU executive, will unveil the plan today. The plan follows a deal to create a €750 billion rescue fund for distressed euro states, an initiative which follows the €110 billion rescue of Greece. Markets gave up some of their gains yesterday after the rally that greeted the plan on Monday.
The commission will lean on provisions in the newly enacted Lisbon Treaty to propose that no finance minister could block a negative finding by the other ministers. Commission officials argue that the immediate adoption of measures to toughen economic surveillance and deepen policy co-ordination is the only way to protect the euro.
The commission will say such measures can be introduced under Article 136 of the Lisbon Treaty, which empowers the European authorities to adopt “measures specific” to euro countries.