Correspondent's Choice

This story about potential sanctions for budget offenders was published by EurActiv on 17th June 2010.

Imposing tougher sanctions on countries with debt problems, such as Greece, would exacerbate the economic crisis and disadvantage Eastern European countries, diplomats said ahead of a summit today (17 June) on strengthening EU budget discipline rules.

EU leaders will today raise doubts about the validity of economic sanctions to get countries to whittle down their deficits to below 3% of GDP, the EU’s agreed threshold.

Talks ahead of the summit reveal a lack of enthusiasm for “hitting countries when they are already down,” diplomatic sources said.

Countries with excessive deficit and debt levels are likely to face financial penalties under the revised Stability and Growth Pact. Up to now, the EU was focusing on deficits and neglecting the debt situation. This mistake will be corrected by the summit, diplomats said.

Herman Van Rompuy, the President of the European Council, will address the summit orally and outline his view about sanctions, but his concrete proposals in written form would come only in October.

The bottom line is that the EU will “stop some funds” to bad performers.

But a Franco-German proposal to suspend countries’ voting rights as a last resort is not being taken seriously by others around the table, diplomats said.

Countries with high debts, like Belgium and Italy in particular, will be seeking softer commitments.

In addition, Eastern European countries, like Poland, which is one of the greatest beneficiaries of EU regional funds, are worried that new sanctions would disproportionately affect their economy.

“Why stopping cohesion and not agriculture? There should be equal treatment,” an Eastern diplomat said.

“Imposing stronger penalties is fraught with difficulties as countries are already in trouble and taking money would only exacerbate these problems,” another added.

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