The European commission could be empowered to impose austerity measures on eurozone countries being bailed out, usurping the functions of government in countries such as Greece, Ireland, or Portugal. Bailed-out countries could also be stripped of their voting rights in the EU, under radical proposals being discussed at the highest level in Brussels before this week’s crucial EU summit on the sovereign debt crisis.
A confidential paper circulated to EU leaders on Tuesday by Herman Van Rompuy, the EU council president who will chair the summit on Thursday and Friday, says that eurobonds or the pooling of eurozone debt would be a powerful tool in resolving the crisis, despite fierce German resistance to the idea. It calls for “more intrusive control of national budgetary policies by the EU” and lays out various options for enforcing fiscal discipline supra-nationally.
The two-page paper, obtained by the Guardian, is to be discussed on Wednesday among senior officials in an attempt to build a consensus ahead of the summit. It may instead set off an explosive rebellion by eurozone countries balking at the options outlined by Van Rompuy, who heavily emphasises the need for a new punitive regime overseen by EU institutions that would be given new powers of intervention.
The proposals and policy options, if agreed, will be seen as seriously curbing the sovereignty of member states in setting budgetary, economic, and fiscal policy.
For countries deemed to be insolvent and in receipt of eurozone and International Monetary Fund bailouts but failing to meet the terms, Van Rompuy raises the prospect of drastic action: “The granting of exceptional powers to the [European] commission (or another body) to take enforceable measures in the country concerned so as to ensure the stability of the euro area.”
It adds: “In case of consistent non-compliance, political sanctions such as the temporary suspension of voting rights [in EU councils]” might be imposed.