MEPs pass key eurozone budget reforms

12th March 2013, Comments 0 comments

The 17 eurozone states will need to manage strained public finances more carefully under controversial legislation passed on Tuesday that gives Brussels the right to vet national budgets before they are implemented.

The European Parliament approved overwhelmingly a set of rules known as the "two-pack," agreed in 2011 when the eurozone debt crisis looked as if it might sink the single currency completely.

The aim is to ensure that member states stick to EU rules on the public deficit -- the annual shortfall between government revenue and spending -- and on total accumulated debt.

The EU limit for the deficit is 3.0 percent of gross domestic product and total debt 60 percent of GDP, but most members have been overspending for years, leading to massive blowouts which are only now being brought back under control slowly and painfully.

Under the new rules, eurozone governments will have to submit their annual budgets by October 15 to the European Commission which can require changes to ensure they either meet the debt limits, or are heading in that direction.

The Commission will also have an additional oversight function for those states which have requested debt rescue aid or are in special difficulties.

Although Brussels acquires unprecedented powers, national parliaments retain the right of final budget approval.

The "two-pack" goes together with the "six-pack," a similar set of measures introduced in late 2011 to ensure better budget and economic policy coordination among all 27 EU members.

Combined, they are meant to strengthen the EU's core Stability and Growth Pact designed to maintain fiscal discipline and boost growth and much-needed jobs.

EU Economic Affairs Commissioner Olli Rehn said that if the measures had been put in place when the euro was launched, there would have been no eurozone debt crisis or it would have been much less severe.

Commission head Jose Manuel Barroso said the vote "significantly reinforces the tools for coordinating budgetary and economic policies at EU level, complementing the advances already made through the Six Pack legislation.

"This vote is further proof of Europe's willingness to move forward together to strengthen economic governance and lay the foundations for a deeper and more genuine economic and monetary union," Barroso said.

© 2013 AFP

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