EU to peer review national budgets - good or bad ?

sinnerboy

http://www.rte.ie/business/2010/0512/eurozone.html

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.

It strikes me that this could hardly be a bad thing- for instance - would Bertie have been able to get away with telling the EU to "commit suicide" for highlighting budgetary weaknesses ?

http://www.rte.ie/news/2007/0704/economy.html

Sure , he apologized for the clumsy remark - but side stepped the warning . He may have been compelled to take action upon EU peer review

ntlbell

makes little difference as they have no authority to make them change them.

sinnerboy

No - but they may embarrass a govt into doing so .

Scarab80

Fine if a country is in breach of deficit rules, or was in breach of deficit rules in their previous year, or if the country is in receipt of EU bailout funds.

Otherwise no.

thebman

I think its a great idea as long as they do what they say they will do.

Little point in claiming to peer review and not doing it properly.

dunsandin

who pays the piper, calls the tune. Money talks, broke walks. If we want their dough, we have to meet their conditions, we cant have it both ways.

DJCR

Brilliant idea!! Less chance of **** ups and Book fiddling!!

Not that I'm saying they won't try, its just if this happened they would have more people to hush up!!

Profits down!!

ricman

Maybe they could make sure countrys have a working tax system that collects tax from everyone, and all service providers have to issue receipts and keep records of all transactions ,and keep proper accounts before they let them into the european union.As we saw with the banks ,weak regulation = disaster and economic chaos.

ei.sdraob

sinnerboy wrote: »

No - but they may embarrass a govt into doing so .

like the government ever listen to the EU before

i hope they have more teeth this time

Cookie_Monster

It's a good idea and needs to be done. Just look at the mess a lot of countries are in as the ignored the agreed rules in the first place.

Anything that takes power away from our useless government is a plus in my book. The Irish have proved over the last 60 years they cannot govern or manage any aspect of a country properly.

cson

Cookie_Monster wrote: »

It's a good idea and needs to be done. Just look at the mess a lot of countries are in as the ignored the agreed rules in the first place.

Anything that takes power away from our useless government is a plus in my book. The Irish have proved over the last 60 years they cannot govern or manage any aspect of a country properly.

That might be a trifle harsh.

sinnerboy

cson wrote: »

That might be a trifle harsh.

But a common enough sentiment that perhaps may help folk overcome the perceived "loss of sovereignty" in the EU proposal

.

There are two types of people who will be totally against this:

1 - Anti-Lisbon loons. Even though it has nothing to do with Lisbon. Nuff said.


2 - People who know that they're in a very privileged position thanks to our own government's incompetence. People who might say they 'work hard' and earn 'pittance' will not like any outside interference in their gravy train.

thebman

Well from my point of view, I think it is dangerous to have a common currency and not peer review budgets/financial regulation.

A single currency is unworkable without the above and and it was always a matter of time before we had problems with the single currency without countries keeping an eye on each others finances and pointing out massive errors in budgeting that some countries are making.

Obviously they should not have the power to change these budgets but they should be publically critical of the governments in these countries so that their citizens can apply pressure if they agree.

Scofflaw

The Communication causing all the fuss is here: http://ec.europa.eu/economy_finance/articles/euro/documents/2010-05-12-com%282010%29250_final.pdf. It's a bit dense, but not too bad.

cordially,
Scofflaw

opinion guy

Absolutely not. We never would have even had our boom had Germany been able to tell us to raise our corporate tax rates like they wanted to

zootroid

Budget controlled by efficient bureaucrats rather than fat parochial gombeen men??

This is indeed a great day.

Seriously though, given how peoples trust in TDs has deteriorated over the last number of years, further oversight over how our taxes are spent is to be welcomed. The fact that they have to submit their budgets to the EU would act as a deterrent for wasteful spending that might not be made known to the public. Some government agencies have huge budgets, but yet the public know very little about how this money is spent.

smokingman

Thing is, they can't touch our low corporation tax - just not possible.
I think the loons are up in arms just because they read headlines and nothing else. The EU is proposing to peer review budgets - not force us to change them!

Given that we don't even have a qualified economist as our finance minister (or any other minister qualified to handle their portfolios for that matter), I see this as being long overdue. At least we'll have qualified people looking at our numbers instead of the likes of Fingers Fiddleton etc....

Liam Byrne

opinion guy wrote: »

Absolutely not. We never would have even had our boom had Germany been able to tell us to raise our corporate tax rates like they wanted to

Damn! So the boom was avoidable if only we'd just raised corporation tax ?

Give me sustainable growth any day, instead of a "boom and bust".

Sleepy

I think it's a good idea that would give opposition parties across the EU a stick with which to beat a government that wasn't being fiscally responsible.

Macca3000

I can just picture Jim Corr belting away at his keyboard announcing the world recession was all masterminded by a group of evil dictator types who wanted to break several countries and force them into submission and accept a One World Governance Committee:D

Seriously though, given that the people in charge of the country now were the same people who helped get us here, the intercession of outside objective minds can only be a good. Even if it means very tough decisions are made for us rather than by us.

Scarab80

Liam Byrne wrote: »

Damn! So the boom was avoidable if only we'd just raised corporation tax ?

Give me sustainable growth any day, instead of a "boom and bust".

I think he means the 90's real boom in FDI not the construction boom.

opinion guy

Liam Byrne wrote: »

Damn! So the boom was avoidable if only we'd just raised corporation tax ?

Give me sustainable growth any day, instead of a "boom and bust".

Absolutely as Scarab said. I'm talking about the investment into ireland from the early 90's on account of our low corporate tax rate that drove the French and the Germans' mental back in the day

Tipp Man

my understanding of this, which could be completly wrong, is that they would review our budgets to ensure that we were not breaking any of the EUR rules, and if we were discussions would take place

I don't think it is Europe trying to dictate the actual budget, so our corp tax is not actually up to them. But what they can say is our budget deficit is 15% of GDP, rules say it should be 3% so either raise income, cut expenditure or both. I don't think they are actually going to say you need to cut 5,000 nurses, raise the top band of income tax etc. More focused on the bigger picture and complying to the rules for the EUR

I have no problem with this but would not like them to dictate specific policy to our government

Scofflaw

Tipp Man wrote: »

my understanding of this, which could be completly wrong, is that they would review our budgets to ensure that we were not breaking any of the EUR rules, and if we were discussions would take place

I don't think it is Europe trying to dictate the actual budget, so our corp tax is not actually up to them. But what they can say is our budget deficit is 15% of GDP, rules say it should be 3% so either raise income, cut expenditure or both. I don't think they are actually going to say you need to cut 5,000 nurses, raise the top band of income tax etc. More focused on the bigger picture and complying to the rules for the EUR

I have no problem with this but would not like them to dictate specific policy to our government

They'd be able to make specific policy recommendations, but can't dictate anything. These appear to me to be the relevant sections of the Communication:

The surveillance will include a scoreboard that will indicate the need for action. A scoreboard, reflecting both external as well as internal developments, would be defined and regularly monitored. It would encompass a relevant set of indicators and reflect, inter alia, developments in current accounts, net foreign asset positions, productivity, unit labour costs, employment, and real effective exchange rates, as well as public debt and private sector credit and asset prices. It would appear particularly important to detect asset price booms and excessive credit growth at an early stage to avert costly corrections of fiscal and external imbalances at a later stage. This analysis would form the basis for the formulation of the recommendations for preventive or corrective measures in the Member State(s) concerned.

A review of budget proposals, with a scoreboard. Nice idea.

As regards the euro area, the Commission will also assess macroeconomic imbalances developments and prospects as a whole. Looking at the euro area as a whole and on a country-by-country basis, the Commission would assess the risk of all possible forms of macroeconomic imbalances that jeopardise the proper functioning of the euro area. In such a case, the Commission would conduct a more in-depth analysis of the underlying risk of emerging imbalances. This analysis will be the basis for policy orientations. The Council, with only euro-area Members voting, would invite the Member State(s) concerned to take the necessary action to remedy the situation. Should the Member State(s), within a stipulated time frame fail to take the appropriate measures to correct the excessive imbalance, the Council, with a view to ensure the proper functioning of EMU, could step up the surveillance for the Member State concerned and decide, on a proposal by the Commission, to issue precise economic policy recommendations. Where necessary, the Commission would use its possibility to issue early warnings directly to a euro-area Member State. Recommendations, if and when appropriate, could also be directed to the euro-area as a whole.

Where a country's proposed budget might lead to 'imbalances' that would affect everyone, there would be a more detailed analysis. After a vote, the country might be asked to take measures to rectify the perceived problem(s). If they don't, the Commission can (a) watch them more closely, and (b) publish specific policy recommendations of its own.

Is this the bit where "the EU" is supposed to "have a veto" on Ireland's budget? Because it clearly doesn't have any such thing. Nor do I see how this could "jeopardise" Ireland's corporation tax rate, which hasn't even been implicated in our financial woes.

Preventive and corrective actions are potentially needed in a wide range of policy areas to effectively influence the macroeconomic imbalances and their underlying structural causes. Unlike in the correction of excessive deficits, economic policies tend to have only an indirect and lagged impact on the development of external imbalances. Therefore, depending on the specific challenges of the economy concerned, policy recommendations could address both the revenue and expenditure side of fiscal policy (in the context of the Stability and Growth Pact) as the crisis has shown that the evolution of the composition of government revenues is also an important lead-indicator of potential imbalances. In this context, recommendations could address the functioning of labour, product and services markets in line with the broad economic policy and employment guidelines. They should also cover macro-prudential aspects to prevent or curb excessive credit growth or exuberant asset price developments, in line with the future European Systemic Risk Board analysis.

Policy recommendations can be about more or less anything that has an economic effect - which seems reasonable. Still just recommendations, though.

A system of early peer-review of national budgets would detect inconsistencies and emerging imbalances. To ensure true and accurate data, a prerequisite would be to strengthen Eurostat's mandate to audit national statistics in line with recent Commission proposals. It is important to bring this proposal swiftly into force as this will improve the quality of reporting on public finances. An earlier tackling of the building-up of fiscal imbalances would ease their reversal and avoid becoming a serious risk to macroeconomic stability and fiscal sustainability. The submission of the Stability and Convergence Programmes should take place in the first half of the year rather than towards the end of the year as is the current practice. In full respect of the prerogatives of national parliaments, the early peer-review would provide guidance for the preparation of the national budgets in the following year.

Get budget proposals in earlier, and beef up statistical reporting/auditing. OK.

For the euro area a horizontal assessment of fiscal stance should be carried out on the basis of the national Stability Programmes and the Commission forecasts. Special consideration to the aggregate stance should be given in the cases of serious economic stress in the euro area, when sizeable fiscal policy measures taken by individual Member States are likely to produce important spill-overs. In case of obvious inadequacies in the budget plans for the following year, a revision of the plans could be recommended. The Eurogroup should have a crucial role to play in this new system of enhanced coordination and, where appropriate, have recourse to formal decision making as provided by the Lisbon Treaty.

Again, recommendations - this time where the policy of a given member state has important spill-over effects. Again, seems reasonable.

A European Semester should encapsulate the surveillance cycle of budgetary and structural policies. It would start early in the year with a horizontal review under which the European Council, based on analytical input from the Commission, would identify the main economic challenges facing the EU and the euro area and give strategic guidance on policies. Member States would take conclusions of this horizontal discussion into account when preparing their Stability and Convergence Programmes (SCPs) and National Reform Programmes (NRPs). SCPs and NRPs would be issued simultaneously, allowing the growth and fiscal impact of reforms to be reflected in the budgetary strategy and targets. Member States would also be encouraged, in full respect of national rules and procedures, to involve their national parliaments in this process before submission of the SCPs and NRPs for multilateral surveillance at the EU-level. The Council, based on the Commission's assessment, would subsequently provide its assessment and guidance at a time when important budgetary decisions were still in a preparatory phase at the national level. In this context, the European Parliament should be appropriately engaged.

Timing of the review cycle, importance of involving national parliaments and the European Parliament - which means more scrutiny and earlier scrutiny of budgets.

All of that seems pretty reasonable to me.

cordially,
Scofflaw

Tipp Man

Scofflaw wrote: »

They'd be able to make specific policy recommendations, but can't dictate anything. These appear to me to be the relevant sections of the Communication:



A review of budget proposals, with a scoreboard. Nice idea.



Where a country's proposed budget might lead to 'imbalances' that would affect everyone, there would be a more detailed analysis. After a vote, the country might be asked to take measures to rectify the perceived problem(s). If they don't, the Commission can (a) watch them more closely, and (b) publish specific policy recommendations of its own.

Is this the bit where "the EU" is supposed to "have a veto" on Ireland's budget? Because it clearly doesn't have any such thing. Nor do I see how this could "jeopardise" Ireland's corporation tax rate, which hasn't even been implicated in our financial woes.



Policy recommendations can be about more or less anything that has an economic effect - which seems reasonable. Still just recommendations, though.



Get budget proposals in earlier, and beef up statistical reporting/auditing. OK.



Again, recommendations - this time where the policy of a given member state has important spill-over effects. Again, seems reasonable.



Timing of the review cycle, importance of involving national parliaments and the European Parliament - which means more scrutiny and earlier scrutiny of budgets.

All of that seems pretty reasonable to me.

cordially,
Scofflaw

Thanks Scofflaw, I don't see any problems here. Europe reviewing our numbers and giving recommendations if they have problems, all good for me

Tim Robbins

I think its imperative the EU do this. Could you imagine Ireland under the punt let each county have its own budget that it never oversaw?

Riskymove

Tipp Man wrote: »

Thanks Scofflaw, I don't see any problems here. Europe reviewing our numbers and giving recommendations if they have problems, all good for me

thats my reading of it too, the EU being told how much we are borrowing etc in advance, rather than needing approval on the measures we are introducing

Scarab80

Free consultancy, nice one.

thebman

Scofflaw wrote: »

All of that seems pretty reasonable to me.

cordially,
Scofflaw

It seems like something I've wanted for a long time

This will make it much harder for Irish politicians to make weird claims like we are the envy of Europe, thats why they mock our property bubble :P

Tim Robbins

thebman wrote: »

It seems like something I've wanted for a long time

This will make it much harder for Irish politicians to make weird claims like we are the envy of Europe, thats why they mock our property bubble :P

Although you got admit a 2 tier or a very fragmented Europe is surely inevitable now.

sinnerboy

I see Brian Cowen is at pains today to dismiss claims that this has got anything to do with rates of corporation tax . I take it the implication is that he is in favour of the EU proposal . Good .

dunsandin

Euro backwards is O rue, and i think our government may well soon rue the effects of Peer review, they must be sweating, all those cosy arrangements and dodgy loopholes, but then again, the eurocrats usually manage to balls up the simplest task, so peer review will turn out to be a blunt sledge, wielded by a lunatic, or a squeaky kids hammer, wielded by a wally.