Euro Treaty seems like poisonous gift for Di Rupo

21st December 2011, Comments 0 comments

During the European summit on 9 December, 26 EU countries - all member states except Great Britain - committed themselves to balancing their budgets or to book a surplus and to keep debt below 60% of the GDP. These countries further agreed to include this ‘golden rule’ in their constitution or legislative basis to ensure it remains legally binding. In addition they agreed to introduce a corrective mechanism, which implies that if a country deviates from the set-out budgetary path, the corrective mechanism will automatically become operational and the country in question will need to submit a programme to undo the deviation. The new Euro Treaty could be a toxic Christmas gift for Prime Minister Elio Di Rupo, as it not only limits autonomy in respect of the federal budget and policy for the next few years, but  could undoubtedly result in tensions between the regions. The introduction of this mechanism requires either an amendment of the constitution or a revision of the particular financing act which regulates the flow of funds between the federal government and the regions and communities. Both these options are tricky from a political perspective, especially in view of the tension that already exists between Flanders and the other regions. Flanders has managed to balance its budget but Brussels and Wallonia are not even close. Moreover Flanders refuses to book a surplus to cover these regions. The new Belgian stability programme is sure to cause much debate as it is as yet unclear exactly what efforts the regions and local authorities municipalities and provinces will need to make in this respect. It’s assumed that Flanders, Brussels and Wallonia will mutually agree how they divide responsibility for these efforts. The Di Rupo government may not have estimated the scope of the new Euro Treaty for the regions as the principles were discussed in one night. Time is not on Di Rupo’s side, however, as talks on the new Euro Treaty must be finalised by the end of January next year. Discussions on the technical aspects started yesterday and the new treaty will be signed during the European summit early in March next year. In Germany the pressure is also mounting as all countries having approved this new permanent rescue funding programme or European Stability Mechanism ESM will be bound by the strict Euro Treaty. In this way Germany attempts  to link support to contaminated countries in the Eurozone to stringent budgetary discipline.

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