BRUSSELS, Oct. 29 (Xinhua) -- European Union (EU) leaders endorsed a plan late Thursday to improve economic governance in the 27-nation bloc, with the aim of avoiding a repeat of the sovereign debt crisis through tougher fiscal discipline and closer economic coordination.
The following are the key elements of the plan, which will be the basis of the biggest reform since the euro was created in 1999.
TOUGHER FISCAL DISCIPLINE
The reform plan calls for tougher fiscal discipline to ensure that member states stick to the EU limits on their budgetary deficits and government debts.
At the core is the need to strengthen budgetary surveillance and reinforce compliance with EU budgetary rules, notably through a stronger Stability and Growth Pact, which requires EU member states to keep their deficits below three percent of GDP and public debt below 60 percent.
To increase effectiveness of EU fiscal rules, tougher and more automatic sanctions will be introduced.
Future rule breakers will face financial sanctions ranging from interest bearing deposits to fines.
A reverse majority rule will apply to the adoption of sanctions, which means any recommendation on sanctions made by the European Commission will come into effect unless a qualified majority of EU member states votes against.
However, as a compromise, the decision to punish deficit sinners will remain virtually in the political hands of EU governments. If a member state is found in breach of EU budgetary rules, it will be first given six months to take corrective actions.
Only when EU governments find the member state defies orders for it to correct, the commission may propose sanctions.
The additional sanctions will apply to eurozone countries at the first stage and later to be implemented for all EU member states, except Britain.
Germany and France had proposed to suspend voting rights of a eurozone member if it repeatedly breaches EU budgetary rules.
The proposal, which may entail changes to the Lisbon Treaty, had met resistance from some EU capitals. However, EU leaders left the option open and asked for closer examination.
The reform plan also calls for the criterion of public debt to be better reflected in the budgetary surveillance mechanism by paying greater attention to the debt levels of member states, rather than focusing solely on deficits.
