The European Central Bank said draft regulations aimed at strengthening budget discipline in the euro area should be toughened.
“The ECB welcomes the proposed regulations and recommends some amendments aimed at further strengthening the budgetary discipline of the euro-area member states,” the Frankfurt-based ECB says in a legal opinion published on its website. The amendments also aim at “further enhancing the surveillance of the euro-area member states experiencing or threatened with serious difficulties with respect to their financial stability.”
In the aftermath of a fiscal crisis that’s seen Greece undertake the largest restructuring in history, euro-area leaders are attempting to shore up faith in their budgetary discipline. A so-called fiscal compact agreed on Jan. 30 requires balanced-budget rules and speeds sanctions on countries exceeding deficit limits.
The ECB opinion says euro-area member states should submit draft budget and medium-term fiscal plans to the European Commission.
In turn, the commission should be able to “issue an opinion where the draft budgetary plan would lead to non- compliance with the budgetary policy obligations laid down in the Stability and Growth Pact and a structural deficit higher than that foreseen,” the ECB says.
To strengthen oversight of fiscal developments in member states, the ECB says the commission should be free to decide to subject a country to “enhanced surveillance,” even if the country isn’t receiving financial support, and that the European Systemic Risk Board should be informed of the results of that surveillance.
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