Euro ministers delay talks on new debt rules
Thursday, September 30, 2010; 8:58 AM
BRUSSELS -- The finance ministers of the 16 countries that use the euro failed to discuss new proposals to crack down on overspending governments in a meeting Thursday, focusing instead on the financial problems facing Ireland.
Luxembourg's Prime Minister Jean-Claude Juncker said the finance ministers would discuss the European Commission's proposals at a meeting next month.
"I want euro member states to discuss these proposals amongst themselves," said Juncker, who is also head of the eurogroup of finance ministers.
Juncker did concede that there were differences of opinion among the finance ministers but that the proposals were generally "pointing in the right direction."
He said that every single finance minister had insisted during the midst of the government debt crisis earlier this year that the level of debt in Europe had to be addressed to prevent a repeat of the crisis that nearly bankrupted Greece and has forced a number of governments to introduce savage austerity measures to get their public finances back into shape.
"Poetry is over....we now have to prove that this was a serious commitment," Juncker said.
On Wednesday, the European Commission published a set of proposals it hopes will prevent another crisis.
One of the key proposals would force countries to set aside 0.2 percent of their gross domestic product if they run up too much debt. The amount does not sound like much but could reach into billions, depending on the size of the country.
The penalties are aimed at keeping government deficits at or below 3 percent of GDP and debt below 60 percent of GDP.
The Commission wants a more "rules-based" approach to stop politicians all round Europe balking about reprimanding their partners. Under the previous set of rules, EU countries never gathered the will to fine each other when they ran budget deficits that broke the limits.
This inability to rein in government spending came into sharp relief when it took a last-minute euro110 billion ($140 billion) bailout in May from the International Monetary Fund and eurozone nations to keep Greece from defaulting on its government debt.
While most governments agree that the old way failed and needs to be strengthened, there's disagreement on who should have the power to impose the sanctions and whether fines should take effect almost automatically unless governments specifically vote against them.
France is among those opposed to handing over more power to unelected bureaucrats in Brussels.
Though French Finance Minister Christine Lagarde agreed Thursday that it was a "good idea to reinforce the pact," she has not commented about the Commission's proposals - perceived as a sign that she is wary of automatic fines - and has voiced her unease about politicians losing their input.