EU wants to vet national budgets

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Europe announced radical plans on Wednesday to pre-vet member states' budgets from next year, drawing decidedly mixed reactions from euro giants Germany and France.

The idea forms part of a post-recession drive towards pan-European 'economic governance,' aimed at reining in runaway state debts threatening the region's financial stability and wider economic recovery.

Alongside budget oversight, the European Commission also wants to be able to sanction countries that repeatedly breach more strictly enforced bloc limits for deficits and debts, including freezing EU subsidies.

Future EU handouts should become "conditional" on rigorous budgetary discipline, commission chief Jose Manuel Barroso said.

National capitals could also be forced to put aside savings for rainy days ahead, Brussels said.

Fresh from securing a trillion-dollar package of emergency measures to shore up the euro economy, anchored by the IMF and central banks worldwide, the commission also wants leaders to set up a permanent crisis fund.

However, it was the call for an army of Brussels bureaucrats to conduct "synchronised" budget inspections for all EU nations, and not just the eurozone as trailed, that raised eyebrows.

"An early peer review of fiscal policies would help shape a fiscal stance for the EU and the euro area as a whole," the commission said.

"The package concerns the whole EU but this specific proposal has more bite concerning the euro area countries," EU Economic and Monetary Affairs Commissioner Olli Rehn admitted.

Under the terms of a power-sharing agreement struck between new British Conservative Prime Minister David Cameron and the Liberal-Democrat party, any further transfer of powers from Britain to Europe must be approved by a referendum.

Britain jealously guards its fiscal sovereignty, but there was no immediate reaction in London.

There, the new coalition simply stressed key elements in its accord, which included a pledge that "Britain will not join or prepare to join the euro in this parliament," due to last for five years.

German Chancellor Angela Merkel meanwhile said that budgets are "not secret anyway," pointing out that Brussels "can already today form an opinion about what governments put forward during budgetary debates."

Allowing the commission to comment earlier is, "I believe, not a bad thing," she added.

Her deputy, Foreign Minister Guido Westerwelle, had earlier stressed that the "right" to set budgets fell to "national parliaments," representing the "nucleus of state sovereignty."

In France, Finance Minister Christine Lagarde told her parliament that it would be "useful" to exchange documents with partners, in order to share "some indication of the fundamental thrust and the balance" of different national priorities.

Government spokesman Luc Chatel had earlier pointed out: "It's up to parliament to adopt the national budget."

Swedish Prime Minister Fredrik Reinfeldt said it was "not fair to treat us the same way" as those that break rules.

But a Czech finance ministry spokesman summed up the prevailing mood.

"We suppose an assessment by the European Commission would have to have merely the character of a recommendation," he said.

Barroso argued that the process would give "more information and therefore more power to national parliaments," stressing that the knock-on effects of one country's decisions affect all.

Currently 13 of the 16 euro states are under excessive deficit surveillance by the commission.

The commission on Wednesday slammed another four EU countries -- non-euro Bulgaria and Denmark plus eurozone Cyprus and Finland -- for deficit breaches that were neither exceptional nor temporary.

However, it gave Luxembourg a clean bill of health.

© 2010 AFP

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