The European Commission will propose a code of conduct laying out model budget policies for EU states.
This will include criteria for responses to unforeseen shocks, Commission President Mr Romano Prodi said this morning.
In a speech to the College of Europe in Bruges, Mr Prodi said Europe's Stability and Growth Pact, meant to enforce fiscal discipline, had provided a solid and credible anchor, allowing significant flexibility without requiring countries to pursue identical policies.
However, Mr Prodi said more co-ordination was needed to reassure the public and financial markets that there was an effective mechanism for managing the economy alongside the monetary policies administered by the European Central Bank.
"This code will need to set out the principles underlying the member states' economic policies and the criteria for deploying the various economic policy instruments to increase capacity for growth and respond to unforeseen events that may affect the Union as a whole or individual countries," he said.
Mr Prodi said the commission would seek to prevent policies that were out of line with the planned code of conduct.