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EU Agrees on Tougher Fiscal Rules

Service : Economy
TEHRAN, March 16 (ICANA) – The EU's finance ministers met in Brussels on Tuesday to toughen the budget discipline and to introduce punishing measures against governments that overspend.
Wednesday, March 16, 2011 12:12:03 PM
EU Agrees on Tougher Fiscal Rules

European Union finance ministers have finally agreed on comprehensive fiscal discipline measures to transform national budget management and fine governments for overspending.

The six proposed new fiscal measures, approved in a meeting of the finance ministers of 27-member EU, allows the European Commission to impose automatic financial sanctions on Eurozone countries that have budget deficits exceeding 60 percent of their GDP, a Press TV correspondent reported on Tuesday.

The new financial sanctions would be introduced for the 17 Eurozone states and "these would apply earlier on in the excessive deficit procedure," according to a statement issued after the meeting in Brussels.

The measures include tighter monitoring of debt and deficit levels as well as on-current account imbalances in order to prevent a repeat of the debt crisis that forced heavily indebted countries such as Greece and Ireland to apply for international bailouts.

Meanwhile, economists argue that while these steps could ramp up economic competitiveness, they would not do much to rein in Europe's government and bank debt and to stabilize the Euro.

They believe the main problem facing the Eurozone is that it lacks a common financial body to keep its currency together and to bridge its internal differences.

"We've seen, over the last years, the divergence in the economies of the better performing countries and the weaker countries. It means that, over time, there will be a big imbalance, and because we can't use an exchange rate anymore to correct that imbalance, it starts to put pressure on the euro-zone," Fabian Zuleeg with the European Policy Center told Press TV.

The European Parliament has yet to endorse the new fiscal discipline measures approved by the ministers; the goal is to finalize the text of the legislation by June.

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