Member states agree to EU budget review

Finance ministers back plan for budgets to be submitted for review around six months before being adopted.

EU finance ministers today (7 September) agreed that, from the start of next year, they will submit their annual budgetary plans for EU-level review six months before they are adopted.

The review will include comments by the European Commission and recommendations adopted by other governments.

Member states and the Commission believe that the review process will make it possible to steer EU countries away from irresponsible economic policies that endanger growth or financial stability, so avoiding any repeat of the eurozone debt crisis.

“This is a major improvement of our economic governance architecture,”said Olli Rehn, the European commissioner for economic and monetary affairs.

“This cycle of reinforced ex-ante co-ordination at European level will help us to correct imbalances and prevent deviations in due time, when member states prepare their national budgets and national reform programs,” he added.

Ministers agreed that the budgetary plans should ideally be submitted to the Commission by mid-April, with the end of April as a final deadline. Member states are expected to adopt their recommendations for each country during June and July.

As the review process from initial submission to final adoption is expected take around six months, this new process is being called the ‘European semester’.

The budgetary plans will be included in so-called convergence programmes that member states submit to the Commission to show that they are in line with broad economic guidelines agreed at EU level. Up until now, however, convergence programmes have been submitted in the autumn, after most member states have implemented their annual budgets.

The UK expressed concerns earlier this year that the European semester would require it to submit budgetary plans to the Commission before it revealed them to its national parliament, something it said was unacceptable. Member states agreed to include a provision in today’s agreement which states explicitly that the UK will not have to do this.

The budgetary review is one of a series of reforms to economic governance in the EU that the Commission is seeking in the wake of the eurozone debt crisis, and which governments have committed themselves to in principle. Rehn said that he expected “the same level of commitment” on other planned reforms, including a strengthening of sanctions linked to the EU’s stability and growth pact, and making those sanctions more automatic.

The Commission will make detailed proposals for governance reforms on 29 September.

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