Europe gets 'cold feet' over budget fines: Dutch minister

18th October 2010, Comments 0 comments

European Union nations are getting "cold feet" about giving Brussels the power to impose automatic fines when they breach budget rules, Dutch finance minister Jan Kees de Jager said on Monday.

The warning came as finance ministers from around the European Union gathered in Luxembourg for the last meeting of EU president Herman Van Rompuy's "task force" on economic governance before recommendations are presented to national leaders next week.

"A lot of states are getting cold feet now," de Jager said on arrival for the talks, although he argued that they "should support sanctions that are as automatic as possible."

EU economic affairs commissioner Olli Rehn said that Monday's talks represented a "litmus test" which would show "whether states are genuinely for reinforced economic governance or not."

"Now is the moment of truth," he said.

Rehn joked that it was "quite chilly here" but said he trusted the ministers to "back their words with deeds."

Europe issued a flood of rhetoric in the spring about tightening budgetary discipline, in a bid to calm markets showing signs of panic over the Greek debt crisis spreading to other weak eurozone economies.

But as its economy stabilised, with a newer threat coming from a series of de facto devaluations of export-rival currencies such as the dollar, the yuan or sterling, the desire to beef up Brussels oversight diminished.

European Central Bank president Jean-Claude Trichet said at the weekend that "more ambitious reforms are needed," amid mounting reports that Italy and France have succeeded in puncturing a reform drive.

Rehn wants the EU to be able to force countries that overstep a debt threshold currently set at 60 percent of gross domestic product to adhere to strict reduction targets, or forfeit fines.

However, Italy wants a more balanced view of national debt to be taken, so as to even out public and private debt.

Although Italian public debt is among the highest in the world, forecast to peak at 119.2 percent of GDP next year, its proportion of private debt -- huge in other countries such as Ireland or non-euro Britain -- is relatively small.

© 2010 AFP

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