The European Commission will next week recommend that members of the eurozone that break spending rules should be obliged to deposit money with the Commission as a form of guarantee that they will rein in spending.

The proposal is contained in draft legislation, seen by European Voice, that Olli Rehn, the European commissioner for economic and monetary affairs, will present next Wednesday (29 September).

Rehn’s presentation is evidence of the Commission’s desire to press ahead with far-reaching reforms to economic governance despite a deadlock in discussions between member states.

Rehn’s proposal would oblige a eurozone member state to place an interest-bearing deposit equivalent to 0.2% of its gross domestic product (GDP) if, for example, its spending grew significantly faster than its economy.

Any eurozone country whose budget deficit rose above 3% of GDP would have to place a non-interest-bearing deposit (also of 0.2% of GDP) with the Commission. It would forfeit the deposit it if persistently failed to cut its deficit.

Among his other proposals, Rehn will suggest the creation of a macroeconomic scoreboard to rank competitiveness. Uncompetitive member states would be issued with recommendations and warned that they could be fined the equivalent to 0.1% of GDP if they failed to address their competitiveness problems.

Taskforce troubles

Rehn hopes his proposals will unblock negotiations in a ministerial taskforce that is supposed to agree comprehensive reforms by mid-October. The taskforce, which will next meet on 27 September, has become bogged down over how and how much member states should police each others’ policies.

One split concerns whether the costs of reforms should be taken into account when judging whether debt or deficit levels are excessive. The Czech Republic, Hungary, Poland and Slovakia insist they should not be sanctioned because of the short-term effects on their public finances caused by pension reforms. Germany, however, is adamant that there should be no loopholes in the sanctions regime.

Member states are also split over whether EU funding – regional aid funds and agriculture subsidies – should be suspended to countries with outsize deficits or debt.

Austria, Greece, Portugal, Slovenia and Spain firmly oppose the possible loss of regional aid, while France is opposed to the loss of farm money.

Rehn’s proposal will not directly include the suspension of EU funding, although the Commission will say that this should be introduced at a later stage (as an extension of the requirement to make deposits).

At the taskforce meeting on 27 September, Herman Van Rompuy, the president of the European Council, will seek to address Germany’s insistence, with support from France, on a revision of the Lisbon treaty to allow suspension of a country’s voting rights in the Council of Ministers if it persistently pursues irresponsible economic policies. Most other states are opposed in principle to using a suspension of voting rights as a sanction and have no enthusiasm for a treaty revision.