Brussels pushes bid to police national budgets

(MADRID) - European governments will have to submit their national budgets to Brussels before taking them to their own parliaments, under plans pushed on Friday by eurozone finance chiefs.

EU Commissioner for economic and monetary affairs, Olli Rehn, told European finance ministers meeting in Madrid that his proposals for cross-border budget surveillance, to be unveiled on May 12, represented the "main critical lesson of the Greek situation."

That "situation" is a debt abyss that has forced Greece's eurozone partners to draw up plans for tens of billions of euros in rescue loans.

Rehn's scheme -- which would initially apply only to the 16 countries that share the euro but which he eventually wants rolled out to the rest of the 27-nation European Union -- drew staunch resistance from Germany.

But it won "100 percent" backing from euro finance chief and Luxembourg Prime Minister Jean-Claude Juncker.

"There is a pressing and urgent need to strengthen economic policy coordination and ... surveillance," Rehn told reporters after informal talks among the euro partners in the Spanish capital.

Given the "rather optimistic" plans to get public deficits back on track in many EU nations, and the knock-on effects for inter-dependent European nations' credit ratings and general economic performance, Rehn said old habits had to change.

"We are of the view that we should integrate the European dimension into the national budgetary process, early enough to make a difference," he underlined.

"That would imply draft national budgets, or broad budget outlines, could be subject to peer review by euro area member states before being approved by their national parliaments."

He said he was "very encouraged" by the debate around the table, and while he said he would take account of stated German opposition, he stressed that the commission, as "guardian" of EU treaties, has the "right of initiative -- and you bet I will use it."

Deputy German Finance Minister Joerg Asmussen said on Friday that "it is evident that the national primacy in budgetary terms must remain untouched ... there is no question of touching on national budgetary prerogatives," he said of the plans "not yet in written form."

Britain can be expected to adopt an even harder line position. Its Treasury Minister Paul Myners was heading to Madrid for ongoing talks between EU countries on Saturday, but British government officials in Brussels referred enquiries to the Labour Party in London for comment, citing general election sensitivities.

Despite the German stance, Rehn said that a "constructive discussion" was had on reinforcing the eurozone's Stability and Growth Pact, which fixes deficit and debt levels, routinely breached since the crisis, "and how to improve, broaden and deepen budget surveillance as well as economic imbalances" across EU member states.

Juncker's backing, meanwhile, was total, and he stressed that "this is not about taking away from member states and national parliaments specific rights, this is about (sharing) information."

He said that process would allow peers to influence matters when a budget was "going in a direction that doesn't seem convenient to others," or to adjust in light of beneficial experiences elsewhere.

The plans, which form a central part of a broader drive for transnational EU economic governance or government and will be considered by a task force led by EU president Herman Van Rompuy, will receive something of a trial with the economic policies of two eurozone countries being put to peers at forthcoming Eurogroup meetings, Juncker added.

Spain and Finland will be the first to be placed under the scrutiny of partners, with Juncker also demanding Eurogroup representation on Van Rompuy's committee.

European Central Bank chief Jean-Claude Trichet said the need for tighter surveillance across the eurozone and the broader EU was glaring as long ago as 1999 when the euro was being introduced, with subsequent events showing that its stance was "fully vindicated."

Informal Meeting of Economics and Finance Ministers (ECOFIN)