The European Commission proposed that member countries submit their national budgets to Brussels for "peer review" before they are sent on to their national parliaments.

"The package concerns the whole EU, but this specific proposal has more bite concerning the euro area countries," European Economic and Monetary Affairs Commissioner Olli Rehn told reporters at a press conference in Brussels.

The rules are aimed at avoiding a repeat of the Greek debt crisis by preventing countries from over-spending. The measures would apply to all members of the EU, not just the 16 nations that use the euro currency. But many nations feel the EU is over-stepping its bounds by interfering in domestic politics. France and Sweden have both voiced their opposition to the measures.

"That this should concern all countries is something we find a little strange," Swedish Prime Minister Fredrik Reinfeldt told a press conference in Stockholm. "This kind of discussion could perhaps be possible for (countries) with a budget policy that goes against the Stability and Growth Pact," he said.

Mixed message from Berlin

Germany's foreign minister, Guido Westerwelle, spoke out against the EU Commission's proposal, saying that national budgets belong to "the core of sovereignty."

"The budget law is a matter of national parliaments. The European Commission does not determine the budget, that is the job of the German Bundestag, the national parliament," Westerwelle told reporters in Berlin.

However, Chancellor Angela Merkel praised the EU's attempts to crackdown on irresponsible spending, and said the budget measures did not necessarily usurp the powers of national parliaments.

"I would say that the budgetary plans of the member states are not secret anyway, so the Commission can already form an opinion about what governments put forward during

budgetary debates," Merkel told reporters in Berlin.

Sanctions possible

European Commission President Jose Manuel Barosso was clear that he believed a unifying economic policy was inevitable for the euro's survival.

"Member states should have the courage to say whether they do want an economic union or not, because if they do not we better forget about a monetary union," Barosso said.

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The Commission also threatened sanctions against countries that consistently breach the Stability and Growth Pact, which stipulates that no country should run deficits higher than three per cent of gross domestic product (GDP).

"Let's be clear - without sanctions it will not be enough for credibility," he said.

Barosso has said that cohesion funds could be withdrawn for countries that don't comply, however, eurozone finance ministers would have to vote to approve any possible sanctions

The eurozone is under pressure to strengthen its economic governance, after member state Greece was forced to request 110 billion euros ($140-billion) from the eurozone countries and the IMF to avoid defaulting on its debt.

smh/AFP/dpa
Editor: Chuck Penfold