Euro chief backs EU plans to vet national budgets

18th May 2010, Comments 0 comments

Eurozone finance chief Jean-Claude Juncker gave his backing on Tuesday to controversial plans for Brussels to vet the budgets of all 27 EU countries before they are put to national parliaments.

Luxembourg Prime Minister Juncker said the plans, which drew lukewarm reaction from Sweden and others when they were unveiled last Wednesday by the European Commission, were "heading in the right direction."

"It's not a question of cutting across the budgetary powers" of nationally elected politicians, he said.

They simply wanted finance ministers of the eurozone countries to be able to discuss the different budget plans between themselves, he added.

"National lawmakers should be able to take informed decisions," he said, stressing the knock-on impact of one country's policies on the interlinked economies of partners.

"The commission is not going to become the school headmistress for member states' budgetary policies," but member states would be subject to rigorous scrutiny, he added.

Juncker was speaking eight days after ministers agreed a near trillion-dollar (750-billion-euro) rescue plan for heavily indebted members of the eurozone.

European Union Economic and Monetary Affairs Commissioner Olli Rehn said last week that the budget vetting plans should apply to all 27 EU member states.

That is likely to create an early headache for Britain's new Conservative Prime Minister David Cameron.

Under the terms of a power-sharing agreement struck with the Liberal-Democrat party, a key Conservative demand was that any further transfer of powers from Britain to Europe must be approved by a referendum.

Cameron's finance minister, George Osborne, will come face-to-face with his EU counterparts for the first time in Brussels later on Tuesday morning.

At that meeting, plans to toughen regulation of London's powerful hedge fund industry are set to be pushed through despite his opposition.

The eurozone ministers also heard detailed proposals from Spain and Portugal, who last week announced they would accelerate cuts to their public spending in a bid to restore market confidence in the eurozone.

"We are of the opinion that the measures taken are courageous and indicate an adjustment trajectory that gives us satisfaction, because they are accelerating their budgetary coordination," Juncker said.

Partners would form a "definitive judgment" during a meeting of the Eurogroup on June 7, he underlined.

First, some 14.5 billion euros of loans agreed for Greece will be paid on Tuesday, meeting an Athens deadline to resume the most urgent tranche in a debt-pile tallied at some 300 billion euros -- before a further 110 billion euros in planned eurozone and IMF aid.

Over the coming days, the conditions attached to the mammoth sum of emergency aid placed at the disposal of all eurozone countries, in a backstop bid to calm markets, would also be worked out, Rehn said.

Despite the run on the single currency, which on Monday fell to 1.2243 dollars in Tokyo trade -- its lowest level since April 2006 -- Juncker insisted that the euro retained a "credible" place within the global monetary system.

"The euro is a credible currency," he said.

"Price stability has been fully maintained and will be maintained in the future. This is a major feature of the euro and a major asset for investors."

© 2010 AFP

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