Sanctions from Brussels New EU Rules Target Countries with Export Surpluses
The European Commission wants to keep EU members' finances under closer supervision. Countries that have chronic import or export surpluses -- such as Germany -- can expected to be fined under the new rules, which will be announced Wednesday.
Stricter controls are required -- that's what European Commissioner for Economic and Monetary Affairs Olli Rehn believes, at least. In a bid to return stability to the teetering monetary union, Rehn intends to much more closely supervise the economic and financial policies of EU countries, particularly the euro-zone members. Those who fail to meet the criteria can expect sanctions.
According to draft regulations drawn up by Rehn's agency, countries with chronic current account surpluses or deficits (in other words, countries that export far more than they import, or vice versa) are to pay an annual fine amounting to 0.1 percent of their gross domestic product (GDP), because they threaten the stability of the euro zone.
The proposal calls for countries with imbalances to be given early warnings and reprimanded. If their accounts remain out of balance, the European Commission will make political recommendations for their financial and economic policies, as well as for wage increases and structural reforms.
According to Rehn's plans, all EU countries will have to introduce binding medium-term financial planning along with financial policy rules that are modeled after Germany's so-called debt brake (an amendment to Germany's constitution that requires the government to virtually eliminate the structural deficit by 2016). Rehn says that the objectives of the Stability and Growth Pact now have to be "adopted as national legislation."
'Prudent Fiscal Policy-Making'
The Commission also intends to monitor the budgets of member countries more carefully. It is introducing a new "principle of prudent fiscal policy-making," under which countries will not be allowed to let their budgets increase faster than the rate of economic growth. If a country threatens to deviate from the path of solid public finance, its rate of budget increase must even be significantly lower than economic growth.
The European Commission also plans to more vigilantly ensure that the euro-zone members energetically reduce their public debt levels towards the permitted upper limit of 60 percent of GDP. If a country continuously exceeds this limit, or has had a budget deficit of over 3 percent of GDP (the upper limit under the stability pact) for over a year, then, at the beginning of the ensuing deficit proceedings, it has to pay a non-interest-bearing penalty deposit amounting to 0.2 percent of GDP.
If the country in question manages to get its budget under control, it gets the money back. If its government fails to do, the Commission retains the deposit as a fine.
The member states have already been notified of the draft regulations. Rehn intends to publicly unveil his plans on Wednesday.
Translated from the German by Paul Cohen