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EURO Grandeurs’ Vision: EU to Demand Changes in National Budgets Irrespectively of Bailout

 Top officials from the European union and the Euro Zone revealed their grand vision about the common currency, the EURO. In the European version of the Chinese “Gang of Four*”, van Rumpuy (EC), Barroso (EC), Juncker (EUROGROUP) and Draghi (ECB) called EZ member countries to proceed to tighter fiscal control and to “grant an international authority the power to demand changes to national budgets.” Furthermore in their plain is also the provision that “EU should be allowed to demand changes to national budgets” with or without bailout.

In short and in plain English, the Four call national governments to surrender further control of their budgets to uncontrolled authority in Brussels.

“We must articulate the vision of where Europe must go, and a concrete path for how to get there,” European Commission president Jose Manuel Barroso said during a press conference in Brussels.

According to EurActiv that obrained the seven-page report, target is a process towards deeper EU integration with main building blocks – a banking union, a fiscal union and further steps towards a political union. 

Towards an EU treasury office?

Among the most far-reaching suggestions in the report are:

  • Setting “upper limits” on member states’ annual budgets;
  • “Prior approval” for issuing government debt “beyond the level agreed in common”;
  •  Issuance of “common debt” as a medium term option;
  • Setting up an EU “treasury office”;
  • Closer coordination on “labour mobility” and “tax coordination”.

 A not clearly spoken but clear target is also a Two-Speed Europe: while the report rather speaks of the 27 EU-member countries with/or without the Euro, as national referendums loom large on the new Europe Treaty on the rise, I wonder how many citizens would give green light for the loss of their country’s sovereignty.

National referendums loom large

The report acknowledges that decisions on national budgets “are at the heart of Europe’s parliamentary democracies” and that moves towards closer integration will require democratic safeguards involving national parliaments. (EurActiv)

The grand architect of this idea Herman van Rompuy, who refrained from revealing concrete measures and details.

The report comes a day after Spain and Cyprus sought EFSF bailout to save their banks. Together with Greece, Ireland and Portugal, five out of 17 Euro zone members are bound to financial aid. There is talk of France and Italy to join the Bailout-Club.

European Officials Release Grand Vision for Euro

 Top European officials have called for countries that use the euro to grant an international authority the power to demand changes to their national budgets, as part of a grand vision to save the currency and strengthen the union.

 The plan published Tuesday on the European Council website was drawn up by the “gang of four” European presidents: Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Eurogroup President Jean-Claude Juncker and European Central Bank President Mario Draghi.

The four officials’ proposal appears aimed at encouraging Germany to accept closer fiscal integration, such as jointly issued eurobonds, which spread debt risk across the eurozone and would lower the risk of individual states needing a bailout. Germany opposes a quick adoption of eurobonds because it would be exposed Berlin to more potential costs and reduce incentives for weaker states to fix their finances.

A central control over those finance policies may reduce Germany’s fears.

“Greater pooling of decision-making on budgets…(and) effective mechanisms to prevent and correct unsustainable fiscal policies in each member state are essential,” they wrote in the report to be debated at a summit of EU leaders Thursday and Friday.

“Toward this end, upper limits on the annual budget balance and on government debt levels of individual member states could be agreed in common.”

If a country were to flout budget rules “the euro area level would be in a position to require changes.”

It is not clear how much appetite eurozone governments have for surrendering further control over their budgets to Brussels, although all agreed to abide by a 3 percent deficit limit when they joined the single currency.

The plan proposes a “medium term” move towards eurobonds, as well as creating a banking union with a single authority that would insure banking deposits and have the power to shut or recapitalize banks directly, with help from Europe’s permanent bailout fund.

The document is long on vision but short on detail, especially measures to address short term stresses that are threatening to shatter the single currency. (Further reading Associated Press via TIME)

Who controls the ‘international authority’ in Brussels is another question of the single euro currency that has to be answered as soon as possible.

*The Gang of Four was the name given to a political faction composed of four Chinese Communist Party officials. They came to prominence during the Cultural Revolution (1966–76) and were subsequently charged with a series of treasonous crimes. The members consisted of Mao Zedong’s last wife Jiang Qing, the leading figure of the group, and her three close associates.

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  1. “The Gang of Four …were subsequently charged with a series of treasonous crimes”.

    I can go with that thinking.

  2. How to conquer country after country without firing a shot.