The European Finance Ministers in a meeting yesterday endorsed a new system of a "European Semester", which would enable a system of mutual oversight of each other's budget.  UK wins exception.

 

The new system would come into force in January 2011 when the European Commission would produce a survey of the EU economy laying out difficulties faced by both Euro and Non - Euro member states. By April, member states would submit their broad budgetary proposals to the Commission for review. The Commission would then, if necessary, issue guidelines for specific member states by middle of the year.

Chancellor George Osborne has secured an exception for the United Kingdom, where spending plans would be submitted to the House of Commons before they are presented to the European Commission. EU Commissioner Ollie Rehn welcomed the approval from the finance ministers saying this would enable the EU to act proactively before a crisis emerges rather than "sending in the fire brigade when the house is already burning." Mr. Rehn hailed this as a "major improvement of our economic governance architecture.

The Ecofin, however, did not discuss the sanctions or penalties for failing to abide by the European Commission's guidelines. The Commission is expected to produce a proposal which would automatically impose sanctions on member states that do not follow the Commission's advice. The Commission would seek to change the rules such that a qualified majority of member states would be required to lift the sanctions rather than impose them. This proposal would most likely face some opposition in member states including the UK

George Osborne told reporters that he was pleased that UK's "unique schedule" was approved by the Ecofin and that he supported the new EU architecture coordinating economic and fiscal policy.

"As someone who believes strongly in single market, I welcome the creation of an architecture at the EU level that can co-ordinate supervision," he said.  But the Chancellor made it clear that the UK would not support an European level bank levy fund arguing "It is up to national governments to decide what should happen to those revenues."