22nd Nov 2013 11:49
BRUSSELS (Alliance News) - Eurozone finance ministers were set to consider each other's draft national budgets for the first time on Friday, under a new procedure designed to uncover financial trouble in the crisis-laden currency bloc ahead of time.
"Today's meeting is a historical meeting. Unfortunately, hardly anyone realizes it," ING economist Carsten Brzeski said. "This new set-up ... gives the European Commission the opportunity to influence and intervene in fiscal plans while they are still in the making."
"It's something that changes the nature of budgetary planning," a senior EU official added, speaking on condition of anonymity. "I think it is the most significant change since the introduction of the Stability and Growth Pact."
The pact, which entered into force nearly 15 years ago, requires EU member states to bring their deficits down to 3% of gross domestic product (GDP) and their debt down to 60% of GDP.
But the rules were not applied stringently until the eurozone found itself in crisis over the unmanageable levels of debt its nations had accumulated.
The EU has since instituted reforms meant to strengthen budget discipline and economic coordination, overcoming some of its member states' reluctance to give Brussels a say on traditionally sovereign powers.
All eurozone countries except the already closely-monitored bailout recipients had to send their draft budgets to Brussels in October. The commission could have requested those they deemed inappropriate to be redrawn.
"I'm glad that none of the plans met this criteria," EU Economy Commissioner Olli Rehn told lawmakers on Thursday during a hearing at the European Parliament's economic and monetary affairs committee.
"However, in a number of cases there is scope for significant improvement," he added. "In some budget plans, there is no margin for any slippage. In others, we see risks that implementation of the plan could lead to non-compliance down the line."
The commission warned five countries that they are at risk of breaching EU economic rules next year, including Italy and Spain - the eurozone's third- and fourth-largest economies.
Malta, Luxembourg and Finland were the other countries taken to task, while the commission found that Germany and Estonia were the only countries on track to fully comply with the bloc's debt and deficit targets.
In a controversial move, the commission did not immediately grant Italy a budget exemption that would have allowed for growth-enhancing investments. Rome had lobbied hard for the clause as a way to help the eurozone's recovery.
The commission's opinions will now be reviewed by the finance ministers, but no decisions are expected. Barclays analyst Philippe Gudin has predicted, however, that the ministers "may decide to put additional pressure" on the five member states potentially falling foul of the bloc's fiscal rules.
Though eurozone governments are not required to follow the commission's recommendations, those found in breach of the debt and deficit rules in 2014 will face the threat of fines.
Copyright dpa