EU finance ministers close in on semi-automatic budget sanctions

Sep 6, 2010, 16:35 GMT

Brussels - European Union finance ministers looked set on Monday to call for punishments on countries which break EU budget rules to be made semi-automatic.

It was part of a discussion on ways to prevent future Greek-style financial crises.

EU rules set strict limits on the levels of debt and deficit which member states are allowed to run. But the rules have never been properly enforced, leading markets to speculate that states such as Greece and Spain could be close to bankruptcy.

The rules apply to all countries whether they are in the eurozone or not. However, more sanctions are available for offending eurozone members.

'We have sanctions in the (EU) treaty, and the business we have to deal with for the time being is to accelerate these sanctions, to have them playing in a more automatic way,' said Luxembourg Prime Minister Jean-Claude Juncker as he arrived in Brussels.

Juncker presides over the eurogroup, the committee of finance ministers of the 16 states which use the shared EU currency.

He was speaking as ministers gathered for the fourth round of talks in the 'task force' on economic reform to prevent future crises, a group made up of the finance ministers of the EU's 27 member states and chaired by the president of the council of EU states, Herman Van Rompuy.

The task force has already said that sanctions for breaching debt and deficit rules should be made more automatic, to end the current informal 'gentlemen's arrangement' under which member states never actually vote to impose penalties on one another.

No details of how to do so have yet been agreed upon.

However, the EU's economy commissioner, Olli Rehn, said that the EU executive will shortly propose 'a rule that a sanction would be enforced unless a majority of the member states oppose it.'

Such a rule would 'turn the burden of proof and make the application of sanctions much more effective and easy,' he said.

The task force is not expected to present a final report until October. However, Van Rompuy is expected to brief EU leaders on progress at an informal summit on September 16, even though that meeting had initially been envisaged to discuss foreign policy.

Both Rehn and Juncker indicated that the task force is unlikely to call for the creation of a permanent system to bail out eurozone states in trouble. Ministers had initially been meant to debate the idea, but now say that it would be too sensitive at this stage.