EU Commission proposals to compel euro states to seek pre-approval from Brussels for the amount of borrowing in their annual budgets were tantamount “to handing over sovereignty for the running of the economy” to the EU, Fine Gael leader Enda Kenny has said.
The Commission’s plan to tighten budgetary surveillance across euro zone states would allow for the Government’s “budgetary orientations” to be reviewed by the 15 other euro states before they are unveiled in the Dáil.
The measures are designed to compel euro members to cut their debt and avoid any repeat of the Greek debt crisis.
Mr Kenny said the proposals would amount to the handing over of sovereignty of the State and the running of Irish affairs “to peer groups, depending on their political whim, in the EU council of ministers”.
Speaking in the Dáil today, Mr Kenny said the budgetary proposals were “completely contrary” to the newly enacted Lisbon Treaty.
“The proposals mean the political bias of the council, at any particular time, could influence what is being talked about here,” he said.
He called on Taoiseach Brian Cowen to give assurances “that in no circumstances would the Government had over sovereignty for the running of our economy to anybody else”.
Mr Cowen said media reports on measures being proposed by the Commission to improve budgetary policy co-ordination among euro states were not based on published EU documents and so he would not be commenting on specific measures at this stage.
He said, however, that Ireland had laid out a multi-annual plan, with budgetary targets for the coming years, to reduce the general Government balance to below 3 per cent of GDP by 2014, which has been approved by the Commission.
“If the leader of the Opposition is concerned about the need for this country to retain control and management of its own affairs then he should avoid flip-flopping on his basic economic policy about what level of adjustment needs to be made to deal with the structural deficit that exists in this country,” Mr Cowen said.
Under the proposals, Minister for Finance Brian Lenihan would have no veto when his counterparts in the euro group vote on the broad outlines of his budget proposal.
The commission’s plan would give finance ministers from the other euro countries the power to call for a new outline budget if they determine that the original borrowing plan could not realistically reduce the deficit in line with targets set by the EU executive.
The other ministers could also call for a new outline budget if the commission determines that the original proposal could damage the euro. In addition, the Government would face EU sanctions if the Minister were to go ahead with the first proposal, such as a suspension or withdrawal of funding from EU programmes.
The Government’s proposals for the balance of payments and the budget deficit would be reviewed under the plan. As such, the new plan would limit the Government’s room for manoeuvre when crafting its annual financial plan.
Under the existing surveillance system, shown to have failed as 13 of the euro countries built up deficits in excess of EU limits, annual budgets go to the European authorities after they are unveiled in parliament.
“We don’t want to fall into scrutiny of every single budget line. That’s not feasible,” said a senior commission official. “What we want is that the euro group would be able to assess the main budget orientations before they are presented to the national parliament.”
European Commission president José Manuel Barroso unveiled the plan today. It follows a deal to create a €750 billion rescue fund for distressed euro states, an initiative which follows the €110 billion rescue of Greece. Markets gave up some of their gains yesterday after the rally that greeted the plan on Monday.