EU considers farm aid suspension for budget truants
(BRUSSELS) - The European Commission unveiled on Wednesday a proposal to impose tough sanctions on EU members that run excessive deficits, in a bid to prevent a new debt crisis.
Under the plan, the Commission could halt European Union farm, fishing and regional aid to member states that violate budget rules, which forbid public deficits of more than three percent of national output.
"By using these tools we can close the gaps in our economic governance system which were so dramatically exposed by the crisis," Rehn told a news conference.
"The time to act is now, we don't have the luxury of time," he said.
Europe is in the midst of an animated debate on how to tighten budget discipline and prevent a new debt crisis after it was forced to bailout Greece and create a funding mechanism to rescue other countries that may need help.
Europe's Stability and Growth Pact requires states to keep their public deficits under three percent of national output and debt at no more than 60 percent of growth domestic product.
Most EU states have deficits that far exceed the three percent limit.
The current rules call for sanctions against budget sinners but none has ever been imposed because the procedure to activate them is lengthy and complicated.
"It is high time to reinforce the economic union in the EMU and create a genuine Economic and Monetary Union," Rehn said.
He said there was a need for a "wider range of sanctions and incentives" that would be used "preventively and invoked at an earlier stage."
Under the new sanctions proposed by the commission, a member of the eurozone could be forced to put money aside in an interest-bearing account if it makes insufficient progress towards tightening its budget.
Budget sinners could also lose EU aid for agriculture, the fishing industry and poorer regions.
As a first stage, the EU could suspend payments to states that run excessive deficits and give them time to correct the stituation.
However, the commission warns that states that fail to take steps to bring down their deficits could face "the cancellation of the budgetary commitments and the definitive loss of payments for the country concerned."
The penalised state, however, would still be required to pay farmers without the EU reimbursement.
The commission proposal is aimed at helping the work of a task force of finance ministers headed by EU president Herman Van Rompuy that is supposed to offer concrete steps in October.
The proposal, however, does not include a German and French call to suspend the EU voting rights for countries that violate the rules.