EU finance ministers thrash out economy reforms in an effort to curb debt crisis

EU thrashes out economy reforms

LUXEMBOURG — European Union countries on Tuesday thrashed out ways to toughen oversight of their finances to prevent a repeat of the debt crisis that is forcing many nations to make huge and painful budget cuts.

EU Economy Commissioner Olli Rehn told reporters he expected the 27-nation bloc would move “fast forward on reinforcing economic governance,” a day after most agreed on tougher sanctions for countries likely to break the EU’s sound finances rules that limit deficits to 3 percent of gross domestic product and debt to 60 percent.

European governments are under intense pressure from markets to show they can reduce spending — and avoid the breakdown in confidence that hit Greece and pushed it to the brink of bankruptcy.

Rehn praised Germany’s moves to reduce spending, saying all others should follow suit, no later than 2011.

“All the countries should consolidate at the latest next year … as Germany is doing while the countries which have no or limited space will have to start accelerating and intensifying consolidation,” he said ahead of Tuesday’s talks.

His comments were seen referring in particular to Greece, Spain, Portugal and Britain.

British Prime Minister David Cameron warned of major spending cuts Monday. He gave no details except to say Britain’s debt problems are worse than expected.

Seeking to speed up feeble growth, finance ministers planned to discuss broad economic goals such as opening up their economies and stepping up both research spending and the number of people with a university education. These are seen as key factors for a more innovative economy.

The EU has failed to meet similar goals it set for the 2000-2010 period

At a meeting in Brussels on June 17, the EU leaders will take final decisions on more oversight and the strategy.

EU President Herman Van Rompuy said most governments agreed on more sanctions at Monday’s finance ministers’ talks about toughening budget rules.

They also agreed to take advice from the European Commission on their budget guidelines before putting these to their national parliaments. The aim of that input is to identify overly optimistic growth or tax income assumptions and to allow time for changes to government spending.

EU finance ministers will likely agree to give more power to Eurostat, the EU statistics agency, to check on national government data. That move stems from Greece’s messy and fluctuating finance figures last year that alarmed markets and Athens’ EU partners alike because they hid the true state of the country’s lamentable financial condition.

The finance ministers will also discuss financial regulation and oversight as they try to learn the lessons of the financial crisis which forced them to spend hundreds of billions rescuing the banking system.