This is the first article we have read in some time that lends hope for European progress. Below are excerpts from a CNBC/Financial Times story posted on Monday night:
- The European Union would gain far-reaching powers to rewrite national budgets for eurozone countries that breach debt and deficit rules under proposals likely to be discussed at a summit this week, according to a draft report seen by the Financial Times.
- The European Commission would present detailed adjustments for a country in breach of its commitments. The changes would be put to a vote of all other EU countries.
- The measures move well beyond plans presented by the commission last year, which give Brussels the power to review budgets before they are submitted to national parliaments, but not the authority to dictate changes.
- In addition to the new powers for Brussels, the draft includes a proposal requiring eurozone governments to collectively agree their debt levels and the “upper limits” of their national budgets annually. If a country needs to increase its borrowing, it would be forced to go to other eurozone governments to get prior approval.
- Although the draft does not call for immediate moves towards full-scale eurozone bonds, it does suggest interim steps, including studying limited mutualization of short-term debt, known as “eurobills”. A redemption fund – first proposed by a panel of German economic experts that would only mutualize current debts of eurozone countries in excess of 60 percent of their economic output – is also presented as a possible interim step.