CORRECTED: EU stiffens budget rules to avert future crises
EU states that let their deficits spin out of control could face stiff fines after the European Parliament adopted on Wednesday tougher budget rules to prevent future debt crises.
But after a year of hard bargaining between governments, the parliament and the European Commission, some legislators said the new rules came too little too late following the debt debacles in Greece, Ireland and Portugal.
The reform will require governments with runaway deficits and debts to put money into a locked interest-bearing account. The funds could then be used to levy fines if the government fails to clean up its act.
"We have developed a powerful and resistant armour against any future crises," said the parliament's president Jerzy Buzek.
"We cannot turn the clock back, but the package will ensure that member states budgets will be credible," he said.
The reform, known as a "six-pack" of laws, was backed by the conservative and liberal groups of parliament. The Socialist and Green blocs partially approved it, complaining that the bills were too focused on austerity rather than growth.
The threat of sanctions existed before, under the European Union's Stability and Growth Pact, but fines were never imposed as the voting system to impose them made it virtually impossible to make the axe fall on wayward states.
Nearly all members of the 27-nation EU have ignored the pact's rules requiring deficits of no more than 3.0 percent of gross domestic product and debts of less than 60 percent of GDP.
Under the new rules, the European Commission will be able to require governments to take corrective measures if necessary to reduce their deficits and debts.
Governments that ignore this would have to deposit the equivalent of 0.2 percent of GPD into an account. Those whose deficits exceed the 3.0 percent limit would lose the deposit.
A state facing a fine would have to gather a majority of EU states to block it. In the old system, a penalty would have been imposed only if a majority backed the sanction.
© 2011 AFP