UNDESIRABLE AND UNNECESSARY EU FISCAL CONTROL

The new proposed EC Regulations aim at drawing a line under the eurozone debt crisis by granting Brussels sweeping new powers to scrutinize national budgets and in extreme cases "administer" countries struggling with uncontrollable debt levels.

Once adopted by eurozone member states, these new regulations will be directly applicable under national law

• All eurozone countries will be required to put in place independent bodies and to base their national forecasts on independent forecasts;
• All eurozone countries will have to submit draft budgets each year by 15 October to the Commission for approval;
• The Commission will assess the drafts and then issue an assessment, with the power to request changes and a redraft, if it is likely to lead to a breach of the rules underpinning the euro, which bind members to keep minimal budgets.

Countries already breaching the budget deficit rules will have to issue regular reports to Brussels and agree a 'partnership programme' on how to get back back on the right fiscal track. Those either experiencing or at risk of "severe" difficulties with their finances or those already in a bailout programme will be subject to far more invasive monitoring. Essentially, they would lose the power for any kind of discretionary spending. The draft rules would entitle the Commission to grill them on the "content and direction" of fiscal policy, while Brussels would be entitled to see sensitive information on he financial health of individual banks. Bailed-out euro members would remain under this hyper-surveillance regime until they have ^paid back at least three quarters of the money lent to them.

The draft will now go to the European Parliament with real negotiations between the two sides expected to come in April after the proposal has made its way through committee.

The introduction of fiscal controls is not indispensable to currency areas (e.g. the USA, Canada,; Switzerland) where the centre has no fiscal power or responsibility over the borrowing levels of lower tiers.

It is undesirable because decisions on taxes and expenditures are at the core of democracies. To centralize fiscal policy is to alienate people by disenfranchising national parliaments and overriding individually elected representatives neither of which the European electrorate will tolerate.

It will be interesting to see how the 'Spanish' case is now being handled.