30 Sep 2010

EU to punish members who fail to control debt

6:42 am on 30 September 2010

The European Commission has issued plans to punish countries that fail to bring their debts under control and pose a potential risk to the euro.

The proposals include automatic fines for countries that do not manage their finances or their economies properly.

The fines would also affect non-eurozone countries such as Britain, through the suspension of EU aid.

The proposal will now need to be approved by national governments and the European Parliament.

Economic Affairs Commissioner Olli Rehn said that all 27 European Union members could have fines deducted from the funds - such as regional aid - that they receive from the EU budget.

"If these sanctions would have to be implemented ... euro area member states would pay straight from their treasury, while the regime for the EU-27 would work so that we would suspend payment appropriations," said Mr Rehn.

The BBC reports the proposed new rules aim to prevent a repeat of this summer's debt crisis when the eurozone the Greek government had to be bailed-out.

Commission president Jose Manuel Barroso said they marked "a sea change in the way economic governance is dealt with in the European Union".

Governments would be expected to cut 1/20th of their excess debt every year.