The European Union completed a framework for tougher controls on spending by euro-area governments in a German-led bid to prevent a repeat of the debt crisis that has threatened to break apart the single currency.
The European Parliament voted to let the EU screen the budgets of euro nations earlier and more closely monitor countries where rising borrowing costs pose risks to financial stability. The assembly also approved tighter EU fiscal surveillance of nations after they exit rescue programs.
With Europe still struggling to contain a crisis that Greece triggered in late 2009, the two pieces of legislation complement 2011 laws that granted the EU stronger powers to sanction spendthrift euro countries. The latest rules also follow a new European treaty aimed at limiting budget deficits.
“With such rules in place three years ago, we would have avoided the problems currently experienced by some countries and which have threatened the whole euro zone since it would have been possible to take early, clear and quick actions,” said Jean-Paul Gauzes, a French member who helped steer the measures through the 27-nation EU Parliament today in Strasbourg, France. European governments have already signaled their support after a negotiated deal with the assembly last month, making their final approval a formality in the coming weeks.
The 17-nation euro area is putting the finishing touches on its fiscal straitjacket as economic sluggishness in Europe prompts calls for policy makers to pay more attention to growth-boosting policies. As a result, the new rules could be put to a political test the moment they start to be applied.
France wants an extra year until 2014 to bring its deficit within the EU limit of 3% of gross domestic product, Italy is mired in a post-election political stalemate that threatens to reignite debt-market tensions, and Ireland this year intends to become the first euro country to emerge from an aid program.
In a provision that may limit any extra backsliding by France, the more-intrusive EU fiscal surveillance of euro countries will let the European Commission examine their draft budgets before approval by national parliaments. Annual spending plans will have to be submitted to the Brussels-based commission by Oct. 15 the previous year.