The European Union on Tuesday thrashed out ways to toughen oversight of how governments run their economies in a bid to regain credibility with markets and prevent a repeat of the debt crisis afflicting the region.
EU Economy Commissioner Olli Rehn said he expects finance ministers from the 27-nation bloc would move quickly to reinforce economic governance at a meeting in Luxembourg, a day after most agreed on more sanctions for countries with risky finances.
The euro has been roiled by the fallout from a debt crisis that started in Greece, one of the 16-nation currency's smallest economies, after it revealed that it had been lying over the state of its public finances.
The crisis has exposed weaknesses in the monetary union and led to massive market pressure on governments to show they can reduce spending, even as the economic recovery remains fragile. The austerity measures are provoking unrest and labor protests across the continent, with Spanish civil servants striking Tuesday over wage cuts.
The euro has lost nearly 22 percent of its value against the dollar in the last six months.
Yet even as the EU agreed the details of a massive 750 billion euro ($897 billion) financial rescue package to stave off bankruptcies, a new potential euro member stepped forward.
Estonia is set to become the currency union's 17th member in 2011, Luxembourg Prime Minister Jean-Claude Juncker, who chairs euro zone finance minister meetings, said late Monday. Estonia will get the final word when EU finance ministers meet again on July 13.
They will join a currency facing an overhaul of fundamental rules that aim to coordinate their economies far more than they do now.
Finance ministers on Tuesday agreed to give the EU's statistics agency Eurostat the power to audit national public finances in heavily indebted countries — that aims at preventing countries from misreporting or falsifying statistics, as Greece did in recent years.
EU leaders will next week lay out broad goals to make their economies function better. They are also likely to accept more warnings and greater oversight of their economies.
EU nations agreed late Monday on more sanctions for countries that risk breaking EU budget limits that are supposed to keep deficits under 3 percent of gross domestic product and debt under 60 percent.
Governments have consistently flouted these rules, a major problem for the 16 nations that use the euro because the rules are one of the few ways of coordinating their economies and ignoring them endangers the currency's stability.
EU finance ministers are also expected to agree to take advice from each other and the European Commission on their budget guidelines before putting these to their national parliaments. The aim is to identify overly optimistic growth or tax income assumptions and allow time for changes to government spending.
However, British officials said they would not send their budget plans to the European Commission before they publish their annual pre-budget report in November.
Governments are already making moves to reduce spending. Germany has announced some 80 billion euros in cuts through 2014 and Britain has warned that because its debt problems are worse than expected it will need major reductions in government spending. It did not give details, however.
Spain and Portugal were ordered by other euro zone nations to tighten austerity programs to prevent them following Greece in requiring a financial rescue to meet debt repayments.
Rehn warned that other nations may also need to make cuts but did not say who they were.
France has so far failed to follow Europe's austerity drive to the same degree. The government minister in charge of stimulus efforts, Patrick Devedjian, on Tuesday warned against German-style austerity measures, saying such moves "would be dangerous" for France.
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