Indebted States Must Give Up Control of Their Budgets, Says the Netherlands

Eurozone nations that consistently break budgetary rules should be forced to surrender control over their budgets to a European commissioner or else leave the eurozone, said Dutch leaders September 7.

Countries that “systematically infringe the rules must gradually face tougher sanctions and be allowed less freedom in their budgetary policy,” wrote Dutch Prime Minister Mark Rutte and Finance Minister Jan Kees de Jager in their proposal, which was outlined in the Financial Times. They called for the creation of a commissioner for budgetary discipline with “clear powers to set requirements for the budgetary policy of countries that run excessive deficits.”

This commissioner would require an indebted country to fix its finances. “If the results are insufficient, the commissioner can force a country to take measures to put its finances in order, for example by raising additional tax revenue,” wrote Rutte and de Jager. The nation would also face escalating sanctions from the European Union.

“The final stage will involve preventive supervision, and the budget will have to be approved by the commissioner before it can be presented to parliament,” the politicians said.

“From now on we must prevent countries from violating the rules with impunity and leaving other countries, which do observe the rules, to foot the bill,” they concluded.

De Jager claimed that the Netherlands has “much more influence than people think” and said that Germany and Finland broadly support the Dutch proposal.

The European financial crisis will lead to the debtor nations giving up power to their creditors, most importantly Germany. Watch for proposals like this to become more popular as the creditors demand something in return for their bailouts.