Brussels seeks tight budget control, ECB impatient

Fri Nov 18, 2011 4:20pm EST
 
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By Jan Strupczewski and Sakari Suoninen

BRUSSELS/FRANKFURT (Reuters) - The European Commission is seeking far tighter control of national budgets to combat the euro zone's debt crisis, a senior official said on Friday, as the ECB's chief urged rapid action on a euro zone fund for rescuing countries in trouble.

With the crisis set to topple a fifth euro zone government this weekend, the likely next Spanish prime minister appealed to financial markets for breathing space as he begins tackling his nation's problems - something they may not give him.

In Berlin, Chancellor Angela Merkel made clear she favored a step-by-step approach to tackling a crisis that is spreading to large countries at the heart of the euro project such as Italy, Spain and possibly even France.

One element of Merkel's approach is to keep the pressure on euro zone budget sinners to get their finances in order.

A suggestion of how this could be institutionalized in the medium term came from Brussels. The senior euro zone official said the Commission would next week propose tough monitoring of national economies and budgets, which could eventually lead to some form of common bonds backed by the bloc as a whole.

If the plan were accepted by European Union leaders - a process likely to take a year or more - member nations might have to yield significant control over their finances to Brussels. Commission officials could even appear before national assemblies to justify their budget demands.

STEPPING ON TOES

"The Commission would be of course stepping on the toes of national parliaments and their national sovereignty, so if it disagrees with them on the budget, it would have to be brave enough to go and defend its case," the official said.   Continued...