Annual budget expected to be vetted by Brussels

Malta agrees in principle with a proposal granting the European Commission permission to review all EU member states' annual budgets before they present them to their national parliaments.

The aim of this proposal is to enhance the economic governance of the EU and avoid a repetition of the Greek crisis.

According to the proposal, EU member states should start submitting the main points of their annual budgetary programmes to the Commission and other member states to be verified against the EU's overall economic policy and strategy.

In cases where a member state is found to be proposing measures which breach the interests of the EU's general economic policies, the Commission will ask for changes before the budget is presented to a domestic parliament for approval.

Although in principle many member states, including Malta, agree with the general approach of the new proposals, some countries, including Sweden and Germany, have warned they may impinge on the sovereignty of national parliaments, though the Commission has insisted this will not be the case.

Asked for a reaction on the latest proposals, Finance Minister Tonio Fenech told The Sunday Times that in principle Malta will support the new mechanism.

"If this process fully respects national rules and procedures, our feeling is that it might contribute to improvements in the quality and effectiveness of national economic and fiscal policymaking," Mr Fenech said.

EU member states already submit multi-annual budgetary plans to the EU, known as the Stability and Convergence and National Reform programmes, which detail the budgetary intentions of every country for the following two years.

These programmes, updated each year, are subject to reviews by both the Commission and other member states. Every year the Commission also issues recommendations on which areas member states should focus.

In Malta's case, the Commission has repeatedly called for more details to the submitted plans as it viewed certain aspects of the island's budgetary projections to be vague, over-estimated and not accompanied by detailed plans.

Despite this, Malta is still in favour of more scrutiny by Brussels over its national budget.

"The proposal to improve the synchronisation and the alignment between the Stability and Convergence Programmes, the National Reform programmes and annual budgetary cycle makes sense and should be supported," Mr Fenech said.

According to the proposals, the new budgetary surveillance system would be applied to all member states, but surveillance would be tighter for those which have adopted the euro.

For eurozone countries, such a review mechanism should act as an early-warning system for states found to breach the Stability and Growth Pact, which sets a limit on public debt and budget deficits.

The proposals are also accompanied by a set of new sanctions and incentives.

Those states which are repeatedly found to be infringing the EU's economic and budgetary rules will risk a cut in EU funds, while countries which accumulate large surpluses during periods of economic prosperity would be allowed to spend more during downturns without being subjected to an excessive deficit procedure.

The new proposals will now be put for the approval of EU leaders during their next summit in June.