EU leaders to sign up to tougher economic discipline

Economy and Europe 2020 strategy top agenda of one-day summit.
EU leaders will today seek to agree new measures to enforce better economic discipline when they meet in Brussels for a one-day summit.

They are expected to agree on the need for tougher sanctions for countries that fail to respect the limits on public deficits and debts. They will also agree to provide details about their national budget plans to the European Commission and to each other for review.

The focus on improving economic governance follows the recent sovereign debt crisis that started in Greece and spread to other eurozone countries as investors shunned government bonds because of fears they might default. Angela Merkel, Germany’s chancellor, has called for a new “stability culture” where governments keep deficits under control in order to support the euro.

The summit will be chaired by Herman Van Rompuy, the president of the European Council, and will be the last summit under Spain’s presidency of the Council of Ministers.

It will focus on economic governance, fiscal sustainability and financial market regulation ahead of a summit of G20 leaders in Toronto on 26-27 June.

Leaders will also approve the Europe 2020 strategy, which is designed to restore growth and competitiveness. They will also formally approve the launch of negotiations with Iceland on joining the EU and make a statement on sanctions on Iran.

Taskforce
The discussions on economic governance will be based on the work of a special taskforce chaired by Van Rompuy that has met twice and prepared an initial report.

A senior EU official said today that there was a “high level of convergence” among governments for measures to improve economic governance. There seems to be agreement on improving mutual surveillance of national budgets by submitting draft budgets to the Commission and the Council in the spring. This would allow the Commission and other countries to comment on and possibly suggest changes to budget plans to make sure they were in line with the EU’s targets on debt and deficit levels and did not adversely affect other countries.

An EU official sought to play down suggestions that the UK had refused to go along with this process, saying that member states were required to submit the “broad” outlines of their budgets.

Draft conclusions for the summit say that governments agree on the need for sanctions for breaching the limits on deficits and debts. Some sanctions, including losing EU funds for economic development, already exist but have never been applied because of a reluctance to punish member states having difficulties with their finances.

Merkel has been pushing to strip irresponsible member states of their voting rights, a move that would require treaty change. Nicolas Sarkozy, France’s president, said after a meeting with Merkel in Berlin this week that he was prepared to support treaty change if it was needed. But a new round of treaty change is strongly opposed by many EU governments because of the difficulties in getting the Lisbon treaty into force. The UK government has said it will veto any treaty changes involving a transfer of powers to the EU’s institutions.

Van Rompuy’s taskforce will continue to meet to discuss other aspects of economic governance and will present its final report in October. In the meantime, the Commission will prepare draft legislation needed to put any agreed changes into effect. Van Rompuy wants EU leaders to discuss the conclusions of the work at a summit meeting in October.

2020
EU leaders will also discuss the Europe 2020 strategy. The strategy aims to restore growth and competitiveness by setting targets in five areas. These include: raising the employment rate to 75%; increasing the share of gross domestic product spent on research and development to 3%; reducing greenhouse-gas emissions by 20% compared to 1990 levels by 2020, obtaining 20% of energy from renewable sources and improving energy efficiency by 20%; reducing school drop-out rates to less than 10% and increasing the share of 30-34 year olds who have a university or equivalent level qualification to at least 40%; and lifting 20 million people out of poverty.

The summit will also stress the need to complete work on legislation needed for financial market supervision so that a new system can be put in place from 1 January 2011. EU leaders want to introduce a levy on financial institutions to contribute towards the cost of rescue operations in the event of another financial crisis. This will be the EU’s common position going to the G20 summit in Toronto.

Bank levies are opposed by some major G20 countries including Canada, Australia and Japan.
 
The EU also wants to go to Toronto with a position stressing the need for fiscal consolidation to reduce deficits and to return to growth.

Other points:
* EU leaders will restate their commitments to achieving the United Nations Millennium Development Goals on reducing global poverty and hunger by 2015.

* The summit will endorse Estonia joining the eurozone on 1 January 2011.

* Approval of convening an intergovernmental conference to amend the Lisbon treaty to increase the number of MEPs to 754.

The summit starts at 10am and is due to finish at around 4pm.