EU agrees controversial peer review of national budgets

EU finance ministers have reached broad agreement on a controversial plan to review each others’ national budgets, together with earlier sanctions for member states that break the bloc’s fiscal rules.

Also meeting in Luxembourg on Monday (7 June), an earlier gathering of euro area finance ministers approved the principle component of the zone’s unprecedented €750 billion rescue mechanism.

Speaking to journalists after chairing his second taskforce meeting on economic governance with EU27 finance officials, most of them ministers, European Council President Herman Van Rompuy said governments had agreed to show their national budgets to each other and to the European Commission before seeking national parliamentary approval.

Originally put forward by the commission in May, the pre-vetting of national budgets by Brussels had previously met with stern opposition from a number of capitals including Berlin, London and Stockholm.

Under the new system, which still needs final approval from EU leaders, each government will present its broad estimates for growth, inflation, revenue and expenditure levels in the spring, roughly six months before national budgets go through parliaments.

Any government planning to run a deficit “will have to justify itself to its peers” on why this should be allowed, said Mr Van Rompuy, adding that members with debt levels above 60 percent of GDP would come in for even tougher scrutiny.

After the meeting, British officials underlined the primary role of national parliaments however, in an indication that precise details still need to be worked out.