Support for EU vetting of national budget plans

Member states will submit budgets for review in April.

Finance ministers agreed at their meeting on Tuesday (7 September) that, from the start of next year, they will submit their annual budgetary plans for EU-level review six months before they are adopted.

The review will include comments by the European Commission and recommendations adopted by other governments.

The agreement was welcomed by Olli Rehn, the European commissioner for economic and monetary affairs, as an important step towards reforming the EU’s economic governance in the wake of the eurozone debt crisis.

He called on member states to show “the same level of commitment” to other parts of the EU’s governance-reform agenda, an apparent reference to the slower progress being made by governments in agreeing reforms to EU rules on fiscal discipline and sanctions for those countries that break them.

Ministers agreed that the budgetary plans should ideally be submitted to the Commission by mid-April, with the end of April as a final deadline.

Member states are expected to adopt their recommendations for each country during June and July, at the end of what is being called ‘the European semester’.

The budgetary plans will be included in convergence programmes that member states submit to the Commission to show that they are in line with broad economic guidelines agreed at EU level. Until now, convergence programmes have been submitted in the autumn, after most member states have implemented their annual budgets.

The UK expressed concerns earlier this year that the European semester would require it to submit budgetary plans to the Commission before it revealed them to its national parliament, something it said was unacceptable. Member states agreed to include a provision in the agreement that the UK will not have to do this.

Reform agenda

The budgetary review is one of a series of reforms to economic governance that the Commission is seek-ing in the wake of the eurozone debt crisis, and to which governments have committed themselves in principle.

Governments are, however, divided over other aspects of the reforms.

Nine member states insist that tough enforcement of EU limits to national-debt levels must be accompanied by an agreement that the short-term costs of pension reform should not be included in debt calculations. Germany, however, is adamantly opposed to such an exemption.

Although governments have agreed in principle that member states should have EU funding suspended if they break rules on fiscal discipline, they are split over how this should be done.

Some member states argue that, for the sake of practicality, the EU should wait until after 2013, when laws underpinning funding programmes will have to be replaced, to introduce legal provisions allowing suspension of funds. Others are eager to act sooner. France insists that legal obstacles would prevent the EU from suspending Common Agricultural Policy funding.