World Economy

Bundesbank Wants Tighter EU Controls

Bundesbank Wants Tighter EU ControlsBundesbank Wants Tighter EU Controls

The head of Germany’s central bank has urged Brussels to tighten its controls over EU member states’ budgetary policies. His criticism is that too many compromises have negatively impacted fiscal discipline.

Ahead of an EU executive decision on possible sanctions against some member states for budget deficit violations, the head of Germany’s central bank, Jens Weidmann on Tuesday demanded that Brussels tighten its control over national government’s spending policies, DW reported.

“The EU Commission is caught in a double function,” he told the German daily “Die Welt.”

“On the one hand, it’s the guardian of the EU treaties, but at the same time it’s also an institution that has to mediate between the various political interests of the member states.”

Weidmann concluded that “the compromises that are reached on this basis more often than not give short shrift to budgetary discipline.”

He added that just like German Finance Minister Wolfgang Schauble, he supported the idea of creating an independent body tasked with looking after member states’ spending and income balance.

On Wednesday, the commission is to present its economic recommendations to the bloc’s members, with Spain and Portugal in the crosshairs for exceeding the allowed 3% threshold in fresh borrowing.

On paper, such violations would normally entail sanctions against the big spenders, but no fines have ever been imposed since the introduction of the euro in 2002.

EU Commission President Jean-Claude Juncker looks unlikely to take tougher measures this time around either as he fears that slapping a fine on Spain could have a direct impact on the outcome of a general election in the country on June 26.

The commission expects Spain to log a budget deficit of 3.9% of GDP this year and 3.1% next year, above the maximum 3% as stipulated in the bloc’s Stability Pact. It already booked a deficit of 5.1% in 2015, with neighboring Portugal also having been unable to stick to the rules last year.

Bundesbank chief Jens Weidmann says he’s concerned about these developments. “What’s obvious is that Europe’s zeal to reform its economy and display budgetary discipline has faded,” he complained.

Meanwhile, the European Commission is to grant Italy budget flexibility, when it publishes its specific country recommendations on Wednesday, EUObserver reported.

“Europe has recognized a further element of flexibility,” Italian Prime Minister Matteo Renzi said Tuesday.

He said letters were being exchanged between the commission and his government to set the budget margins the commission will allow for Italy in 2016 and 2017