* EU countries to submit budget plans for peer review
* Move is part of efforts to toughen EU budget rules
By Jan Strupczewski
BRUSSELS, Sept 7 (Reuters) - European Union finance ministers agreed on Tuesday to submit future budget plans for review by the European Commission and other EU governments as part of moves to strengthen EU budget rules.
The process, called the European Semester, is to start from 2011 and will involve governments in the 27-nation EU sending their expected budget revenue and expenditure numbers to the executive Commission by the end of April.
“This is a major improvement of our economic governance architecture,” Economic and Monetary Affairs Commissioner Olli Rehn said in a statement welcoming the agreement.
He said the decision would “help us to correct imbalances and prevent deviations in due time, when Member States prepare their national budgets and national reform programs.”
The agreement is the most tangible result so far of work done by the ministers since May to toughen EU budget rules to ensure there is no new sovereign debt crisis like the one triggered by Greece.
The EU executive will check whether the budget plans submitted are in line with economic guidelines set by EU leaders, and with national long-term deficit-cutting plans and national reform programmes that often have to accompany fiscal consolidation.
The Commission will then write an opinion and euro zone and EU finance ministers will later discuss the draft budget plans at a regular monthly meeting before the end of July.
This would give the Commission and the ministers a chance to discuss the budget plans of an EU country that are inconsistent with its earlier declared fiscal consolidation or reform programmes.
They would also have a chance to look at budgets or reform programmes that will have a clear impact on other EU countries, but have not yet been voted into law by a national parliament.
“The implementation of the European Semester will improve economic policy coordination in the EU and help strengthen fiscal discipline, macro-economic stability and growth,” said draft minutes of the ministers meeting, obtained by Reuters.
Because the peer review of the budgets would happen at the early planning stage, the sovereignty of national parliaments’ decisions on the final budget proposal would not be affected.
The review of the budget drafts would not be detailed, but focus only on the main parameters.
The ministers will also have a preliminary discussion about a bank levy in the EU and a possible financial transaction tax as governments seek to create a financial buffer to help financial institution in case of another crisis. [ID:LDE6860LW]
No decisions on the levy or tax are planned, with more detailed discussions to follow at an informal meeting of the ministers and EU central bank governors at the end of the month.
Meanwhile, economic recovery is gathering pace in the European Union and growth this year will be higher than initially forecast, European Commission President Jose Manuel Barroso said.
Delivering an annual “State of the Union” speech to the European Parliament in Strasbourg, the head of the EU executive said the 27-country bloc had come through the economic crisis strongly but risks remained.
Euro zone finance ministers, meeting in the afternoon, were due to agree to reduce the amount of euro zone aid available to Greece by the contribution from Slovakia, whose parliament voted in August not to take part in the emergency aid programme.
This would cut the amount available to Greece from the euro zone by 816 million euros over three years, leaving more than 79.1 billion euros still available as well as another 30 billion from the International Monetary Fund. [ID:nLDE6860J2]
Reporting by Jan Strupczewski, editing by Ron Askew