European Union finance ministers today agreed that they will start reducing bloated national deficits from 2011 'at the latest,' assuming ongoing economic recovery is sustained.
The deficits decision marks the closest thing yet to setting a timetable for implementing 'exit strategies' to wind down fiscal stimulus plans aimed at alleviating the fallout from the gloabal economic crisis.
20 EU countries have already been slapped down by Brussels for breaching set annual limits - 3% of gross domestic product - with spiralling knock-on debts threatening a political as well as fiscal timebomb.
Last month in the Swedish city of Gothenburg, the EU ministers avoided fixing a set date for the withdrawal of tens of billions of euro pumped into their recession-hit economies since 2008.
The European Commission will decide what to do about deficit warnings already issued to transgressors in November.
Among the worst, the French are forecasting deficits running to 8.2% of GDP this year and 8.5% next year, compared to German predictions of 3.7% there.
The head of the 16 countries that use the euro, Luxembourg Prime Minister Jean-Claude Juncker, warned that such discrepancies could ruin an agreement.
He said that if 'major countries are stepping away from a policy of virtue, smaller countries, mainly those surrounding these countries, would have great difficulties' explaining why they should remain within EU rules.
UK concerns at EU supervisory watchdog
Meanwhile, a European Union plan to set up watchdogs to supervise banks and spot threats to the economy could face delays after Britain voiced concerns and warned negotiations on the law could end in deadlock.
Sweden, which holds the EU presidency until the end of the year, is trying at a meeting of EU finance ministers in Luxembourg to secure agreement to set up the new super-watchdogs as soon as next year.
But Britain is worried the supervisors - who can overrule regulators such as the Financial Services Authority or national governments - could ultimately order taxpayers to spend money.
The European Commission, the 27-country bloc's executive, unveiled its blueprint for an overhaul of the way banks and financial markets are policed last month. It is a central pillar for new rules designed to prevent a repeat of the global economic crisis.
The Commission plans to create a banking super-watchdog, with power to overrule member states, and a pan-European supervisor that would warn of early signs of crisis.
Britain, which part-owns some of the country's biggest banks after saving them from collapse, is concerned the new watchdogs could order it, for example, to inject more money to improve lenders' balance sheets to European standards.
Analysts say the chances of the powers of the new supervisors being watered down are slim. But Britain, fighting to keep control over the centre-piece of its economy, the City of London, could delay their introduction.
There is widespread scepticism in London about the new financial rules which many people in Britain see as an attempt to undermine Europe's financial capital.
The new laws will give more say to European institutions. The risk board, for example, which would be staffed by the European Central Bank and based in the German city of Frankfurt, is likely to have wide-ranging powers.
