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EU summit: Merkel backs EU budget control

While not originally on the agenda, there is speculation Spain may ask for a limited bailout in Brussels.

European Commission President Jose Manuel Barroso rings the bell to start the meeting in Brussels
European Commission President Jose Manuel Barroso rings the bell to start the meeting in Brussels
Image: (AP Photo/Virginia Mayo)

GERMAN CHANCELLOR ANGELA Merkel proposed for a top European Union official to be given the power to veto member governments’ budgets, and suggested that the block could set up a new fund to finance projects in struggling countries.

Merkel addressed Germany’s Parliament ahead of an EU summit starting today where leaders will debate tightening financial integration, creating a banking union and how to deal with the financial needs of Greece and Spain.

In a bid to keep European countries from overspending again in the future, Germany’s finance minister argues that the EU’s monetary affairs commissioner should have the power to veto budgets if they violate deficit rules.

European Council President Herman Van Rompuy, left, speaks with Cypriot President Demetris Christofias at the EU Council building in Brussels today. (AP Photo/Virginia Mayo)

Merkel acknowledged many nations don’t want to concede to Brussels the power to intervene in budgets. However, she said her government will “continue to push for it.”

It’s is the fourth time that the leaders of the EU’s 27 nations have met this year.

While not originally on the agenda, there is speculation Spain may ask for a limited bailout in Brussels.

A diplomatic source has said tha that Spanish Prime Minister Mariano Rajoy might use the summit to “make explicit the conditions that would be imposed in exchange for aid” over and above those agreed in June to help Spain’s banks.

Merkel again rejected the pooling of countries’ debts, an idea favored by struggling countries that hope to regain investor confidence to lower their borrowing costs.

A police officer outside the EU summit in Brussels. (AP Photo/Virginia Mayo)

But she suggested countries could make binding pledges to conduct reforms and be granted money for a limited period and for specific projects from a new fund, possibly paid for by a tax on financial transactions that Germany and 10 other countries have agreed to introduce.

Long-term proposals for overhauling the EU appear likely to play a leading role at this week’s summit, with firm decisions not expected on more immediate matters.

The German leader pointed to last week’s award of the Nobel Peace Prize to the EU as a further incentive to ensure the euro’s long-term future.

“This decision is so significant precisely because it comes now,” she said. “It should be understood as an admonition, even more as an inducement and obligation for all of us in Europe to separate the important from the unimportant and focus on the core of the test in which we find ourselves.”

- AP

Read: Kenny did not call leaders following bank debt deal statement >

Read: European Parliament president calls for deal on Irish debt before 2013 >

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