| EUROPEAN EFFORTS PUT AT WORK TOGETHER 08/06/2010 |
| (2010-06-08) |
| Last updated: 2010-06-09 14:30 EET |
Gathered in Luxembourg, they signed the documents setting up the European Stabilization Fund, aimed at giving loans to the countries facing problems such as Greece. They also developed a control and sanction mechanism that would help prevent a similar situation from occurring again. In keeping with the new principles of economic governance, the European Commission will have the right to set preventive sanctions against a country that does not take into account warnings regarding the public deficit, or if the level of debts starts growing too fast. Sanctions could be applied even if the allowed budget deficit threshold of 3% of the GDP is not exceeded.
The previous proposals advanced by the Commission to strengthen the stability pact governing the use of the Euro provided for halting European funds for the countries facing problems. Drastically, Germany goes even further and suggests non-financial sanctions as well, such as suspending the right to vote in the European Council of a country that does not correct its budget deficit. The finance ministers also agreed that the draft national budgets be analysed at the level of the European Union before being passed by national Parliaments.
Strengthening budget discipline at EU level also entails sovereignty costs, lower though than those generated by faulty budget and fiscal policies. The IMF has also called for tough measures to control the budgets of the EU member states. An IMF report on the Euro zone reads that wrong fiscal measures among others are to blame for the current crisis that some of the member countries are undergoing.
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2025-04-03
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