The European Commission has proposed that euro zone countries submit their national budgets to the EU for what it calls 'peer review' before they go to national parliaments.
The Commission also said it would make proposals for a permanent crisis resolution mechanism to help euro zone countries in 'serious financial distress'. It said this would involve 'clear and credible' procedures. The proposals come days after EU leaders backed a €750 billion rescue fund for euro zone countries.
The Commission said the recent crises surrounding euro zone debt had exposed the vulnerability of euro zone countries and underlined their interdependence. It said the time had come to draw 'far-reaching lessons' about the way economic policies were dealt with.
Commission chief Jose Manuel Barroso also said that future EU hand-outs to member states should become 'conditional' on rigorous budgetary discipline.
Economic and Monetary Affairs Commission Olli Rehn said countries' budgetary policies would have to be co-ordinated in advance, to ensure one country's policies did not put the stability of others at risk.
There are plans to set up a process which would advise euro zone member states on economic policy co-ordination as they prepare their national budgets.
These are controversial proposals which effectively mean national governments would have to share their budget secrets with each other before they present them to their own national parliaments.
This already happens to an extent within the 16 country Eurogroup of states in the single currency, but the Commission proposal calls for a more systematic approach, involving deeper co-ordination among member states and a better enforcement of the rules, especially when it comes to public sector debt.
The centrepiece of the proposal is a so called 'European semester' at the start of each year, when finance ministers would set out their broad approach to tax and spending plans. Every other state would have sight of these plans, and could assess whether they are credible or not.
