(BRUSSELS) - EU policing of public finances in eurozone countries should be extended to include governments' broader economic management, the European Commission recommended Wednesday as the euro's tenth birthday approaches.

Currently, the 15 countries sharing the euro only face EU scrutiny for their public finances, which they are required to keep in line with a strict deficit ceiling of three percent of total economic output.

But the European Union's executive arm said that more needed to be done to ensure the smooth functioning of the shared currency bloc in proposals issued at the approach of the euro's tenth birthday.

In May 1998, EU members agreed that the euro would be launched in January 1999 in eleven countries. Since then eurozone has seen its ranks swell to 15 members and Slovakia is due to join next January.

"As we complete 10 years of economic and monetary union, we must acknowledge that there is still work to be done," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.

"The euro area's governance and coordination of economic policies must be improved," he saod.

"This will involve both deepening and broadening economic surveillance arrangements to guide fiscal policy over the cycle and in the long term and, at the same time, address divergences in growth, inflation and competitiveness."

In particular, the commission called for EU monitoring through a peer review system of current account deficits, persistent inflation divergences or trends of unbalanced growth in eurozone countries.

The commission is counting on the EU's new Lisbon treaty, which is in the process of being ratified by the bloc's members, to strengthen its powers to police eurozone countries.

The new treaty gives Brussels the capacity to send "direct warnings," without EU finance ministers approval, to member states which it considers to have worrying economic trends or are failing in reforms.

Although the shared European currency has outgrown most early pains, it still faces bouts of questioning about how it can be better administered and who should be responsible for that.

While urging more coordination of eurozone policies, the commission stopped short of calling for an "economic government" for the bloc, as French President Nicolas Sarkozy has proposed.

With the euro turning 10, debate is heating up about how to manage the unified economic bloc better, with France and Italy on the offensive against the European Central Bank and pushing for a bigger role for politicians.

In the past, France has led attacks against the ECB for focussing too much on fighting inflation -- its core mandate -- while neglecting growth and has urged a bigger role for politicians in key economic decisions.

In the face of staunch German defence of the Frankfurt-based central bank, Sarkozy has had to tone down his rhetoric on the ECB since he was elected last May, while his proposal for a mini summit on the eurozone has been shelved.

But with the re-emergence of Italian leader Silvio Berlusconi on the European political stage, he can now count on a vocal ally from another big member state, which will help the French cause during France's EU presidency starting in July.

At the same time, France will likely tread carefully for fear of upsetting its peers on such sensitive issues.

"The best way to mess up the French presidency (of the EU) would be to start with polemical subjects like those, for which there's no solution in sight," a source close to Sarkozy said earlier this week.

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