EU spies opportunity to probe Member State finances

Civitas, 10 June 2010

EU governments are discussing how to avoid future EU economic crises, writes Natalie Hamill. A month ago an EU Commission paper suggested that national state budgets should be reviewed by the EU ahead of national parliaments. No one likes “Big Brother” looking over their shoulder; but does the current crisis justify these draconian measures?

EU Finance ministers seem to think so. On Tuesday, at a meeting with EU Council President Herman Van Rompuy, a majority of the national finance ministers agreed to a broad proposal that would allow the EU Commission to examine estimates of member states’ growth, inflation, revenue and expenditure levels, 6 months ahead of the review by their own national parliaments.

Regarding the eurozone, the plan has been promoted as a “cure” to stop euro members breaking the Stability and Growth Pact rules. Until the “Greek crisis”, numerous eurozone states flouted the max. 3% deficit rule and bad financial behaviour went unpunished for far too long. The present crisis in the eurozone has demonstrated why states need to foster good financial behaviour in the future. The zone will expand when Estonia joining the Euro in 2011, so changes need to be made now.

However, whether the solution is deeper integration, across the whole of the EU, is highly debatable. The current budget review proposal would extend the EU’s sovereignty into the national financial affairs of all 27 member states (not just eurozone members) and would be a first step towards a centralised economic and budgetary policy.

Would reviewing state budgets even prevent a future crisis? Or is using the crisis to promote an “ever closer union” leading the Commission to “bark up the wrong tree”? For example, the EU has been silent on how it would prevent state from “figure fiddling” ahead of any EU review. There have been numerous suggestions that Greece was hiding the extent of its debt (with a helping hand from Goldman Sachs and some sly currency swapping), and now stories are emerging of “budget fixing” in Bulgaria, the EU is going to have to try a different tact to prevent devious states “cooking their books”.

Sweden and the UK, both non-eurozone members, have spoken out against the EU’s desire to examine all member state budgets. The UK Chancellor, George Osborne and Prime Minister David Cameron, have both made it clear that the EU will not see Britain’s budget plans before British MPs. Foreign Secretary William Hague said “Budgetary review is a matter for the eurozone and not for those of us outside the common currency, and have no intention of joining in the near future”.  National budgets are national affairs, and member states that have remained outside the eurozone and retained their own currency, be it the Pound or the Krona, should not be forced to reveal their budgets to the Commission before their own elected Parliaments.

Unfortunately, the Commission seems to be using the current financial crisis to extend its sovereignty, instead of seizing the opportunity to close existing loopholes and to develop improved Eurozone practices that could prevent a future crisis.  Long needed SGP reforms, such as tougher sanctions for eurozone states approaching the 3% limit (let alone breaking it) risk being lost in this latest push for power.