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A package of six new laws to monitor countries' debts and imbalances will have to wait until September for an agreement, in spite of a campaign by the outgoing Hungarian Presidency to have the new legislation ready at the end of June.
Sources close to the talks say the row boils down to an institutional battle over who should have the final say on what countries should be doing to redress their economies – the European Commission or the 27 countries sitting in the EU Council of Ministers.
France and Germany widely blamed for current failures
In the member states' corner is France, backed by Italy and Germany, and in the opposite corner are the liberals, represented by Belgian MEP Guy Verhofstadt, who wants the Commission to decide in the European interest.
France and Germany are widely blamed for having suspended the EU's current debt vetting system, the Stability and Growth Pact, when they ignored warnings from the Commission to get their deficits below 3% in 2003.
To counteract what many call cronyism in the Council, the Parliament wants to apply reverse qualified majority voting, whereby a country cannot ignore the Commission's recommendation unless it gets a qualified majority of countries to block it.
The rationale behind RQMV is that it makes it harder for countries to ignore the recommendation when they need such a strong majority to do so.
Greece's current debt problems are an obvious reminder that the current system has failed, their argument goes.
MEPs 'fighting the last war'
Though member states have agreed to use RQMV when it comes to imposing sanctions on repeat offenders, they don't agree with the Parliament that it should also be used earlier, when countries do not meet initial Commission recommendations, like staying within a 3% deficit ceiling.
EU sources are critical of the Parliament for using Germany and France's historical dismissal of the pact as evidence that more RQMV is required.
"This is an easy sell. It is bordering on offensive to say that the two countries would be as stupid as they were in 2003," said a high-level source who wished to remain anonymous.
"The European Parliament reminds me of the generals who are still fighting the last war," the source continued, accusing the Parliament of using the so-called 'six-pack' piece of legislation to expand its powers in EU decision-making.
Abrupt end to a tense meeting
Tensions came to a head on 30 June during the final round of talks under the Hungarian Presidency.
The meeting between the Parliament, the Presidency and the Commission allegedly ended abruptly after a call from the office of Jerzy Buzek, the president of the European Parliament. The Liberal leader, Guy Verhofstadt, had appealed to the president that day for more time.
The Finnish commissioner for economy, Olli Rehn, known for his calm demeanour, was reportedly enraged and demanded to know why he was wasting his time at the meeting.
Rehn has allegedly been trying to broker a compromise between the two sides by suggesting the use of a simple majority instead of RQMV.
Sources from all three sides do not see an end in sight to this row. A diplomatic source said it would be "nothing short of a miracle" if the Parliament were to back down from its insistence for more RQMV.
"When people realise what is at stake, I hope they will increase the pressure on France," said a more optimistic senior source from the ALDE group.
The incoming Polish Presidency has been wrong-footed by the delay as they expected their Hungarian predecessors to draw a line under negotiations on the so-called "six pack".
They have allegedly only had one junior official following the issue, while the Hungarian Presidency had a minister of state in charge of negotiations.