By Daniel Flynn and John O'Donnell
BRUSSELS, Sept 6 (Reuters) - European Union finance ministers moved closer to agreement on swifter sanctions for budget rule breakers on Monday but put off potentially difficult talks on a permanent mechanism to resolve euro zone crises.
The ministers from the 27-nation bloc met under the guise of the Task Force established to discuss changes to EU budget rules, the Stability and Growth Pact, to prevent another sovereign debt crisis like the one triggered by Greece.
'We've made progress, but we don't have any milestones to report at this stage,' French Economy Minister Christine Lagarde said after the talks in Brussels which focused on how to apply sanctions to enforce better compliance with the rules.
Under current rules, member states should not have budget deficits higher than 3 percent of gross domestic product or debts higher than 60 percent of GDP.
'The biggest issue was sanctions. The problem here is about procedures. The issue is whether first to have an overall agreement and then to proceed with legislation, or to proceed with it without an overall agreement,' Slovak Finance Minister Ivan Miklos said.
Any euro zone country that repeatedly ignores budget consolidation targets set by EU ministers can be fined up to 0.5 percent of its GDP, but the procedure has many stages and could take almost two years.
Fines can be imposed only at the last stage, when a country's public finances would probably be in poor shape, and depend on a discretionary decision taken by the ministers.
'Sanctions should be a normal consequence, a quasi automatic consequence if the rules are broken,' Economic and Monetary Affairs Commissioner Olli Rehn said.
'It's a bit like a football game. It won't work if the players start to argue and discuss the rules of the game with the referee every time they call a foul.'
SINGS OF FRUSTRATION
Although talks began in May on toughening the budget rules, frustration is growing at the lack of progress or details.
'We have to be a little bit more patient. We have made a lot of progress on the preventive character of the mechanism of the Stability and Growth Pact,' German Finance Minister Wolfgang Schaeuble said after the meeting.
Under the preventive part of pact, countries should seek budget balance or surplus when the economy is strong, so that there is room for more spending when a downturn hits.
The ministers want to reinforce this goal with sanctions for countries that ignore budget consolidation during good times.
The deadline for changes is the end of October, and the reform is to be approved at a summit of EU leaders.
The ministers did not discuss reforms that would require a change to the EU's highest law, the EU treaty.
Diplomats say a renegotiation of the treaty would entail long talks in many areas not necessarily linked to economic governance, or policy coordination, and that there is no guarantee this would be approved by all EU member states.
Talks on a permanent mechanism for crisis management in the euro zone, initially envisaged for this month, have been pushed back because such a mechanism would require treaty changes.
Ministers said such discussions could be held at a later stage because both the euro zone and the EU now had a good temporary mechanism up and running -- the European Financial Stability Facility (EFSF).
They made clear that a more permanent crisis resolution mechanism was now a medium- rather than short-term goal.
'It would require, in the perception of some of us, a basic treaty change. I don't think we are ready for amending the treaty. The mechanism could be discussed in the coming weeks or it could be wiser to postpone the question to a later stage,' said Jean-Claude Juncker, the chairman of the euro zone finance ministers.
A suspension of the voting rights of finance ministers from countries that violate the rules, as proposed by Germany, was also impractical without a treaty change, he said.
For the ministers' comments, double-click on
(Additional reporting by Daniel Flynn, Michele Sinner and John O'Donnell; editing by Timothy Heritage) Keywords: EU BUDGETRULES/ (jan.strupczewski@reuters.com; +32-2-287 6837; Reuters messaging: jan.strupczewski.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BRUSSELS, Sept 6 (Reuters) - European Union finance ministers moved closer to agreement on swifter sanctions for budget rule breakers on Monday but put off potentially difficult talks on a permanent mechanism to resolve euro zone crises.
The ministers from the 27-nation bloc met under the guise of the Task Force established to discuss changes to EU budget rules, the Stability and Growth Pact, to prevent another sovereign debt crisis like the one triggered by Greece.
'We've made progress, but we don't have any milestones to report at this stage,' French Economy Minister Christine Lagarde said after the talks in Brussels which focused on how to apply sanctions to enforce better compliance with the rules.
Under current rules, member states should not have budget deficits higher than 3 percent of gross domestic product or debts higher than 60 percent of GDP.
'The biggest issue was sanctions. The problem here is about procedures. The issue is whether first to have an overall agreement and then to proceed with legislation, or to proceed with it without an overall agreement,' Slovak Finance Minister Ivan Miklos said.
Any euro zone country that repeatedly ignores budget consolidation targets set by EU ministers can be fined up to 0.5 percent of its GDP, but the procedure has many stages and could take almost two years.
Fines can be imposed only at the last stage, when a country's public finances would probably be in poor shape, and depend on a discretionary decision taken by the ministers.
'Sanctions should be a normal consequence, a quasi automatic consequence if the rules are broken,' Economic and Monetary Affairs Commissioner Olli Rehn said.
'It's a bit like a football game. It won't work if the players start to argue and discuss the rules of the game with the referee every time they call a foul.'
SINGS OF FRUSTRATION
Although talks began in May on toughening the budget rules, frustration is growing at the lack of progress or details.
'We have to be a little bit more patient. We have made a lot of progress on the preventive character of the mechanism of the Stability and Growth Pact,' German Finance Minister Wolfgang Schaeuble said after the meeting.
Under the preventive part of pact, countries should seek budget balance or surplus when the economy is strong, so that there is room for more spending when a downturn hits.
The ministers want to reinforce this goal with sanctions for countries that ignore budget consolidation during good times.
The deadline for changes is the end of October, and the reform is to be approved at a summit of EU leaders.
The ministers did not discuss reforms that would require a change to the EU's highest law, the EU treaty.
Diplomats say a renegotiation of the treaty would entail long talks in many areas not necessarily linked to economic governance, or policy coordination, and that there is no guarantee this would be approved by all EU member states.
Talks on a permanent mechanism for crisis management in the euro zone, initially envisaged for this month, have been pushed back because such a mechanism would require treaty changes.
Ministers said such discussions could be held at a later stage because both the euro zone and the EU now had a good temporary mechanism up and running -- the European Financial Stability Facility (EFSF).
They made clear that a more permanent crisis resolution mechanism was now a medium- rather than short-term goal.
'It would require, in the perception of some of us, a basic treaty change. I don't think we are ready for amending the treaty. The mechanism could be discussed in the coming weeks or it could be wiser to postpone the question to a later stage,' said Jean-Claude Juncker, the chairman of the euro zone finance ministers.
A suspension of the voting rights of finance ministers from countries that violate the rules, as proposed by Germany, was also impractical without a treaty change, he said.
For the ministers' comments, double-click on
(Additional reporting by Daniel Flynn, Michele Sinner and John O'Donnell; editing by Timothy Heritage) Keywords: EU BUDGETRULES/ (jan.strupczewski@reuters.com; +32-2-287 6837; Reuters messaging: jan.strupczewski.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.