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Compromis over economisch beleid onder handbereik (en)

EUOBSERVER / BRUSSELS - The Irish Presidency today proposed a solution to the row over the EU's economic rules which is threatening to block agreement on the Constitution.

In a new "declaration on the Stability and Growth Pact", expected to be annexed to the Constitutional Treaty, the Presidency hopes to bring Member States together on the crucial question of economic governance in the union.

The row - over whether Member States or the European Commission should have the most power to co-ordinate economic policy in the EU - has pitted Germany against the Netherlands.

While Germany - along with Poland, Italy and Greece - want the power of the Brussels executive to reprimand member states on their budget deficits to be curbed, the Netherlands has been fighting equally hard to see the Commission get more powers.

And the compromise offers concessions to both.

Commission loses power

Under the draft proposals, the Commission will have less power than was proposed in the Convention text to "police" the economies of the Member States.

The proposals would allow the Commission to present "recommendations" to a Member State which has broken the euro rules by allowing its budget deficit to exceed three percent of gross domestic product (GDP).

But Member States will be able to block these recommendations by Qualified Majority Voting.

Under the text drawn up by the Convention, the Commission would present "proposals" which could only be blocked unanimously by Member States.

This new development is likely to please Germany - which is currently in breach of the rules itself - but annoy the Netherlands - also in breach of the rules but much stricter on the need to uphold them.

Surveillance in the good times

Therefore, the trade-off is a new clause inserted into the draft text which will force Member States to make sure that they have surpluses in their budgets during periods of strong economic growth.

One of the complaints from countries such as the Netherlands is that the Stability and Growth Pact only acts when economic growth is slow and budget deficits are ballooning. They argue that if countries took care to build up a surplus when growth is fast, the problem of deficits in recessions would be mitigated.

The draft declaration states, "The Conference agrees that Member States should use periods of economic recovery actively to consolidate public finances and improve their budgetary positions".

"The objective is to have a budgetary surplus in good times which creates the necessary room to accommodate economic downturns and thus contribute to the long-term sustainability of public finances".

Sources close to the Dutch delegation say they are waiting for other Member States to react to the new proposals before they issue their own opinion. The Dutch finance minister is said to think that the proposals look good but could still be improved.

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