Brussels steps up control over borrowing rules

 
Tim Wallace
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THE EUROPEAN Commission will get new powers to monitor Eurozone governments’ budgets and can demand changes if they do not fit in with European borrowing rules under a deal struck with the European Parliament yesterday.

But a plan to pool debts was abandoned after countries led by Germany rejected the idea that they should back other states’ borrowing.

The aim of the so-called two-pack deal is to strengthen discipline over spending and taxation in an effort to stop budget deficits ever getting out of hand again and causing crises like those in Greece and Spain.

Rules have already been introduced to make sure states running deficits of above three per cent of GDP are punished more quickly in the future, after governments went unchecked in running up borrowing before the crisis.

Under the new rules countries deemed to be getting out of line will be put under close surveillance, reporting to the European Commission every quarter and forced to correct past mistakes.

“This will mean that the Eurozone can benefit from a more integrated and effective policy-setting framework already for the 2014 budgetary cycle,” said commissioner Olli Rehn.

Towards the end of the year the European Commission hopes to propose further measures to coordinate economic reforms.

And although Germany rejected plans for pooled borrowing as it fears high-borrowing member states could benefit from its prudence, the European Commission is planning more work towards a shared debt programme to be implemented at a later date.