Direct EU tax proposal draws McCreevy criticism

The European Commission will not repeat its rebuke of Ireland to other states whose budgetary policy fails to meet EU targets, Belgium's finance minister implied yesterday.

Mr Didier Reynders, who is chairman of the group of EU finance ministers, said scrutiny of other states would remain behind closed doors.

Mr Reynders was speaking ahead of a public meeting of finance ministers at which his proposal for a direct tax to fund part of the EU's budget was criticised by the Minister for Finance, Mr McCreevy.

The Belgian minister said the proposal was a subject for the future, which would be discussed at Eurogroup meetings in September and December.

But Mr McCreevy said: "As far as I am concerned individual member-states should retain full responsibility for all direct tax policies. Some would say that the attempt to introduce stamp duty led also to the American revolution." Mr McCreevy was supported by his counterparts from Britain, Mr Gordon Brown, and the Netherlands, Mr Gerrit Zalm.

On fiscal planning, Mr Reynders refused to single out states where budgets were under pressure. It is known, however, that the Eurogroup's attention has focused on Italy, Germany, France and Portugal, where slowing growth has threatened the ability of government to meet strict budget deficit targets agreed this year.

The Commission issued an "official recommendation" in February criticising the Budget introduced by Mr McCreevy but Mr Reynders said such matters would be discussed only in private in the interests of greater candour and policy co-ordination.

Mr Reynders said: "It is important for us to go further with the economic co-ordination and to have a more open and direct dialogue within the meeting. It is only an exchange of views between the members before a general statement."

When Mr McCreevy's spokeswoman was asked what her interpretation of Mr Reynders's comment was, she said: "Maybe they have learned from their experience of our recommendation."

The spokeswoman said Ireland's censure had not been discussed at a meeting of euro zone finance ministers which took place in Brussels on Monday evening before Mr Reynders spoke to journalists. She said Mr Reynders was not referring to Ireland.

Also yesterday, Mr Pedro Solbes, the European Commissioner for Monetary Affairs who issued the rebuke to Mr McCreevy, said at a briefing that budget action was needed by some member-states.

He noted that both Portugal and Italy had unilaterally declared they were studying their budget performance but said he had been encouraged by the meeting.

"I am reassured by the confirmation of the ministers that fiscal consolidation will continue to have a high priority in their agenda," Mr Solbes said.