European Commission President José Manuel Barroso strongly defended the suggested transfer of powers as the only way out of the eurozone debt crisis.
The proposals came in the form of two new regulations (1 and 2) which – once adopted by eurozone member states and the European Parliament – will be directly applicable under national law.
The plans were presented alongside a public consultation document exploring the possibility of issuing joint Eurobonds to stabilise the single currency, despite continued opposition from German Chancellor Angela Merkel.
The two new regulations include proposals:
- Requiring independent debt forecasts to be used by eurozone states in assessing their budgets;
- For all eurozone countries to submit draft budgets each year to the Commission by 15 October for approval;
- For the Commission to assess the drafts and then issue an assessment, with the power to request changes and a redraft; and
- For member states to have the power to ask that the Commission answer to national parliaments for its budget changes or recommendations.
Commission would administer struggling states
The blueprint also suggest that when a country is assessed by the Commission and other eurozone countries to be in a distressed state, superior administrative control should be given to the EU Executive to monitor its finances.
These changes should be implemented using article 136 of the Lisbon Treaty, which allows eurozone countries to adopt budget surveillance rules for themselves, without requiring the approval of those outside the single currency area.
Barroso strongly defended his proposals against accusations that they would be undemocratic and constitute a power grab by Brussels.
“When member states defer their power under parliamentary procedure to a supra-national institution, then that is a democratic decision. Member states have created these institutions by their own democratic will. What is the alternative, to create new institutions? That would not make sense,” he told journalists.
Asked if he believed that the Commission had the political legitimacy and the technical expertise to carry forward such proposals, he said: “We think we can do this. The point is, if the Commission does not, then who else could?”
He added that such measures were necessary because otherwise “it will be difficult, if not impossible, to maintain the single currency”.
Merkel remains set against Eurobonds
The stricter budgetary surveillance plans came alongside a public consultation to launch ‘stability bonds’ to mutualise debt within the single currency bloc, something that would ease market pressure on highly indebted economies but also push up the borrowing costs of healthier countries like Germany.
The plan, previously disclosed by EurActiv, contain three options, two of which would definitely require a change in the EU treaties. A decision on whether to launch Eurobonds will not be made until the public consultation closes on 8 January.
Speaking in the Bundestag on Wednesday, Merkel reaffirmed her opposition to such proposals: “It is extremely troubling, I might say inappropriate, that the Commission is now focusing on proposals on Eurobonds in different varieties.”
Barroso said that he believed that no member states opposed bonds on principle, but that some had issues with the practicalities. And in any case, Eurobonds would not be introduced before the stricter budget surveillance rules are approved.
An EU diplomat told EurActiv: “It is not just Germany that opposes bonds, it is not 16 against one, but the Germans will definitely give the proposal thorough examination.”
Finnish Finance Minister Jutta Urpilainen has also ruled out the idea of Eurobonds.
December summit to focus on treaty changes
Progress on any such proposals – especially those that would require treaty changes – will now become intertwined with the broader background debate on treaty change under way in advance of the summit planned for the heads of state in Brussels on 9 December.
Germany is seeking wide changes to clear the way for electing an EU president by direct suffrage. The French also want changes that would allow the European Central Bank to be a lender of last resort, and the potential for further fiscal convergence.
