EU Commission: “essential cornerstone of reinforced economic governance is to coordinate fiscal policy in advance”

The EU Commission’s proposals for in-advance peer-review of proposed national budgets has provoked a heated political reaction in the Dáil.  As Miriam Lord wryly notes, the a vice-president of the European People’s Party, Fine Gael’s Enda Kenny is being accused of Euroscepticism.

However Taoiseach Brian Cowen doesn’t seem as opposed to the proposals as, say, the Swedish Prime Minister, Fredrik Reinfeldt.

In Germany, despite a difficult week, Chancellor Angela Merkel welcomed the proposals

Chancellor Angela Merkel praised the EU’s attempts to crackdown on irresponsible spending, and said the budget measures did not necessarily usurp the powers of national parliaments.

“I would say that the budgetary plans of the member states are not secret anyway, so the Commission can already form an opinion about what governments put forward during budgetary debates,” Merkel told reporters in Berlin.

Her coalition partners are not so enthusiastic

Free Democrat (FDP) leader Guido Westerwelle, German foreign minister and deputy chancellor, said the proposals infringed on a “core competence” of parliamentary democracy.

“It’s the German Bundestag and national parliaments that determine national budgets, not the European Commission,” he said.

German MPs in all parties expressed concern yesterday that the Commission proposals would curtail their influence.

As the Irish Times European correspondent, Arthur Beesley, reports

THE EUROPEAN Commission is bracing for a battle with Germany, France and other member states over proposals to compel the 16 euro states to submit draft budgets to Brussels before they are presented in parliament.


Already, however, there are signs of resistance from Germany and France. “We are all striving for deeper and better co-ordination, but what is not open to question is the solemn responsibility of national parliaments,” a German source said.

After a cabinet meeting in Paris, the response from the French government’s spokesman was frosty. “It’s parliament that votes on the nation’s budgets, it’s not the European Commission that votes on the budget of the French nation,” he said.

When announcing the proposals EU Commission President José Manuel Barroso laid down a challenge for eurozone national governments

EU commission chief Jose Manuel Barroso said: ‘You can’t have a monetary union without an economic union and this is the absolute prerequisite for having monetary union.’

And the EU commissioner for Economic and Monetary Policy, Olli Rehn, set out the specific proposals

The Lisbon Treaty provides plenty of room for progress through a better and full use of the existing economic policy instruments, and through revised and new secondary legislation, where needed. In particular, article 136 on economic policy coordination enables us to develop new tools for reinforced economic governance in euro area.

Today’s communication is built on three blocks:

First, we must reinforce both the preventive and the corrective arms of the SGP. The Pact is a solid set of rules, but it has suffered from a chronic failure to comply with rules and principles.

The essential cornerstone of reinforced economic governance is to coordinate fiscal policy in advance, in order to ensure that national budgets are consistent with the European dimension, so that they don’t put at risk the stability of the other member states. This can be done in the framework of a European economic semester. [added emphasis]

The Excessive Deficit Procedure will remain the core of the implementation of the Pact. But we need to sharpen our teeth. We should speed-up the steps of the EDP and make more rigorous and conditional use of EU expenditure to ensure better compliance with the rules of the Stability and Growth Pact. This will require changes in secondary legislation.

We need to apply rigorously the current Cohesion Fund regulation when dealing with Member States in repeated breach of the Pact.

Back in the Irish Times, Arthur Beesley, again, with this analysis

Article 136 gives ministers the right to vote on these matters by qualified majority, meaning no minister has a veto over a decision of the wider group. Implicit in the proposal is recognition that toothless surveillance has only magnified the problems of the euro. When EU leaders decided to go for broke last weekend by creating a mammoth rescue fund, the message was the foundations of the euro were under threat.

The message from Barroso is that this move was but the first part of a new grand bargain, the second part being deeper co-ordination in return for hundreds of billions worth of solidarity. “Member states should have the courage to say whether they want an economic union because they don’t want that, it’s better to forget monetary union altogether.” It’s a fundamentalist argument.

The counter-argument will be too.