EU okays draft eurozone budgets

European Economics Commissioner Jyrki Katainen in Brussels on Tuesday gave preliminary approval to draft national budgets submitted by member countries in time for this week's deadline.

The Commission's experts would now "work to complete their detailed assessment of the draft budgetary plans, and the new Commission will adopt its opinions on these in November," Katainen said.

The new EU Commission will take power in Brussels on November 1 under its new president, former Luxembourg Premier Jean-Claude Juncker.

Katainen's Commission reviews whether eurozone member countries' draft national budgets are in line with European debt and deficit rules.

French Finance Minister Michel Sapin welcomed Katainen's preliminary approval of the country's draft budget, saying the "constructive dialogue" with the Commission on France's 2015 budget would continue.

But Sapin also reiterated his government's view that more must be done at the EU level to kick-start economic growth in the bloc.

"We must collectively find the means to drive an economic recovery in the whole eurozone," he said.

France and Italy make adjustments

On October 22, Commission officials showed they were worried about what they saw as excessive deficits planned by some countries by formally requesting more details on draft budgets that had been submitted by Italy, France, Austria, Slovenia and Malta.

In the ensuing days, national treasury officials consulted intensively with EU Economics Commission officials in efforts to resolve the Commission's concerns.

France and Italy had been pushing for a relaxation of deficit limits in order to reduce the risk of tipping Europe back into recession. Germany, Finland, and some other countries have continued to push for more stringent efforts by eurozone countries to reduce their structural budget deficits.

On Monday, Italy and France separately published letters to Katainen outlining adjustments to next year's national government budgets. The letters said the adjustments would further trim the countries' deficits - bringing them closer to the levels set out in EU agreements.

Italy said it would scrap 3.3 billion euros of planned tax cuts - about 0.3 percent of its government budget - and take other measures that would reduce its spending by 4.5 billion euros compared to the draft budget it sent to Brussels for initial review two weeks ago.

France said it would save money due to lower-than-expected interest payment costs on its national debt, and a downward adjustment to its contributions to the EU's own budget - an automatic adjustment that resulted from its weaker than expected economic performance last year. In total, France said these factors would reduce its expected 2015 budget deficit by an amount equivalent to 0.5 percent of GDP.

Commission's powers

Eurozone countries and the Commission engage annually in extensive consultations to agree on the general direction of their budgets for the coming year, in a process that takes place over about six months of the year prior.

The additional step of having the Commission vet draft national budgets in October before they are submitted to national parliaments for approval is meant to catch any significant departures from what governments had agreed to earlier.

A new EU "two-pack" law passed in March 2013 - a package of two regulatory reforms to the revised 2011 Stability and Growth Pact - has allowed the Commission to put a country that is "threatened with financial difficulties" under strict budget surveillance. That means the government would be obliged to deal with the problems that led to the difficulties, and be subject to quarterly progress reviews.

nz/ng (Reuters, dpa)