Radical new plans which could open the way for a common European fiscal policy will be discussed today by European finance ministers as part of a new drive to create a single currency.
The plans, which would effectively subject national budget planning to greater joint EU decision-making, are certain to fuel British fears that the single currency would undermine sovereignty. The aim is to make EU countries inside and outside monetary union keep their spending under control, so that the single currency remains stable and keeps its value.
Yves Thibault de Silguy, the EU commissioner for monetary affairs, said the intention of the programme is to make countries meet the economic convergence rules set out in the Maastricht treaty. He spoke as finance ministers gathered for an informal meeting in Verona.
Mr de Silguy outlined a system under which finance ministers might in future have to submit their taxing and public spending plans to their European partners for agreement, should their economies appear to be running into trouble. If the plans were not deemed to be tough enough to keep the national budget in line, the EU council might propose alternatives. In effect, he said the council would become a "council of stability".
"It would be up to the council to evaluate progress," said the commissioner. Mr de Silguy spoke of the need for "peer group pressure" to keep countries on the right track.
One set of stricter new rules would be drawn up for countries seeking to meet the Maastricht rules in order to qualify for monetary union, and another set would be drawn up for those countries already inside EMU.
Rules for economic convergence already exist under the treaty, which also includes provision for sanctions. But Mr de Silguy suggested yesterday that support was now growing for a far tighter programme of "automatic" rules and penalties to encourage all countries to keep to the rules, particularly on budget deficits.
Mr de Silguy spoke of a new "stability programme". The programme, he said, would involve "auto-correctional" budgetary measures. He also floated the idea of a new "multi-lateral surveillance system" for EU economies which might be operated by the European Commission.
Kenneth Clarke, the Chancellor, was already expecting to do battle in Verona over EU moves to encourage Britain to join a new exchange rate mechanism in the run up to monetary union. As news of the new "stability programme" emerged it seemed certain that Mr Clarke will now have to defend another flank, with national powers over fiscal and monetary matters both under assault.
Signs that the EU might be moving towards developing a common fiscal policy have been slowly emerging in recent months. There has been growing concern about how to bring countries into line in the run up to monetary union. But concern has also focused on how to force countries which do join to continue to obey the convergence rules.
In November Theo Waigel, the German finance minister, proposed a "stability pact", threatening fines for countries which join the single currency if they then failed to maintain the Maastricht criteria. The "stability programme" appears to have grown out of this plan.