Ministers ‘support’ budget vetting by EU
European commissioner says EU ministers “broadly support” idea of “systematic and rigorous assessment” of national budget plans by European Commission.
The European Commission claimed today to have won “broad support” from finance ministers for a proposal that draft national budgets should be submitted for approval by the EU.
Olli Rehn, the European commissioner for economic and monetary affairs, said that he would present a formal proposal on 12 May for the establishment of a “European semester of economic policymaking”, stretching from January to July, during which draft budgets would be evaluated prior to being sent to national parliaments.
“Member states would submit rather concrete budget proposals during the spring so that they could be evaluated and assessed by the Commission and then finance ministers,” Rehn said.
“That could, and most likely should, lead to recommendations to the member states to take remedial action,” he added.
He said his intention was that there should be “systematic and rigorous assessment” of member states’ budget plans.
Both Rehn and Spanish Finance Minister Elena Salgado emphasised, however, that the Commission’s plans stopped short of having EU-level votes on whether to authorise draft budgets. Salgado said that any such proposal would have been a “non-starter” because of member states’ sensitivity to any threat to their control of public finances.
Rehn and Salgado were speaking after an informal meeting of EU finance ministers, held in Madrid. Spain currently holds the rotating presidency of the EU’s Council of Ministers.
Salgado said that Rehn’s proposal had been “well received” by ministers. Jean-Claude Trichet, the president of the European Central Bank, encouraged the Commission to pursue the initiative. “It is extremely important that…we have peer surveillance [of budgets],” he said. Eurozone countries “share a destiny in common,” he said.
Rehn, reinforcing a point he made after a meeting yesterday of eurozone finance ministers, said that current EU procedures precluded a “meaningful assessment of national budgets for the following year”.
“We only have ex-post assessment,” he said.
Rehn said that tighter budgetary surveillance would improve the functioning of the eurozone economy, as other countries would have early input on “critical decisions that influence the whole euro-area, with significant spillovers”. He said that it would also support fiscal consolidation in the EU, after the rapid escalation in deficits during the financial crisis.
Rehn renewed his recent criticism of member states’ multi-annual budget consolidation plans, saying: “There is, broadly, a lack of concrete measures for fiscal consolidation in the medium term”. He has held up the Greek debt crisis as evidence of the need to budget consolidation seriously.
Investors have, in recent days, become concerned that Portugal could soon be facing similar difficulties with its public finances as Greece. Interest rates charged by investors on ten-year bonds issued by the Portuguese government reached 4.49% on Friday, a seven-week high. The anxieties of the market have been heightened by a warning from the Commission earlier this week that Portugal may have to adopt additional consolidation measures this year if it is to meet its budgetary targets.
The commissioner, however, sought to dampen the market speculation, saying yesterday that, “my understanding is that the Portuguese government fully understands this situation and is ready to adopt additional [fiscal consolidation] measures, if needed”.
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