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PostFri May 14, 2010 3:10 am » by Reinaul

EU bids for power over national budgets

Move comes as Spain, U.K. target deficits
Last Updated: Wednesday, May 12, 2010 | 12:50 PM ET
CBC News

Senior administrators of the European Union proposed on Wednesday that they be given unprecedented power to scrutinize the spending plans of countries before national parliaments vote on those budgets.

The EU's executive commission's bid was a move to crack down on widespread government overspending and to begin to deal with the debt crisis that threatens the exchange value of the euro.

The commission is the administrative arm of the European Parliament and is independent of national governments.

It also proposed serious financial penalties for countries that break the rules — essentially forcing governments to pay a financial penalty that could eventually be returned to them.

The move came as European governments scramble to deal with their deficits.

Spain announced Wednesday it will cut civil servants' salaries this year by an average of five per cent starting in June.

Prime Minister Jose Luis Rodriguez Zapatero also told parliament his government would suspend automatic inflation adjustments for civil service pensions, cut foreign aid and domestic spending by $7.6 billion US and eliminate a tax break for couples that have babies or adopt a child.

Britain's newly formed coalition government pledged to begin tackling the U.K.'s record $236 billion US deficit, beginning with an immediate cut in government spending of $9 billion.

More Greek strikes planned

At the same time, Greece's two main public and private sector unions announced a new general strike to protest pension reforms for May 20.

The proposal by the EU commission would deepen the ties that bind Europe's currency union just when some analysts predict the debt crisis will eventually cause its disintegration.

Olli Rehn, the EU commissioner for economic affairs, said the EU's moves would ensure that national governments' spending plans were "consistent with European objectives."

The commission would need the backing of EU governments before it can draft more detailed rules for them to vote on and put in place.

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