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Brussels takes on oversight of EU budgets, deficits

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(Globalpost/GlobalPost)

New forecasts for growth, EU control of government deficits and the oversight of national budgets: these are big developments in a heavy month for the European Commission beginning on Tuesday.

Following the drawn-out adoption of new tools intended to help harmonise cross-border economic governance for the eurozone as a whole, Brussels can for the first time order changes to draft national spending plans.

Assessments will be made on November 15 and will show whether the European Commission can impose its will and emerge as a credible supervisor armed with its new crisis-fighting powers, including the ability to issue fines.

The objective is to make sure that at least all eurozone, and it is hoped all European Union states, run their budgets with the common good in mind, rather than just their own interests, after the harsh lessons of the debt crisis.

Not all member states are as sensitive to their national perogatives as non-euro Britain but even in the 17-member eurozone, Brussels' new powers are likely to cause friction.

"Some lawmakers won't take kindly to this," said one EU source busy with the build-up.

France is committed to closer eurozone integration over time but tensions are possible with its current Socialist government led by President Francois Hollande who is floundering in opinion polls.

The French government has until 2015 to get its public deficit under the three-percent-of-GDP threshold that so many European countries flouted for so long, but which Brussels now says must be scrupulously observed.

Having got a two-year extension to its deadline earlier this year, Paris has had to commit to difficult reforms in exchange, notably covering retirement and pensions.

It has a public-deficit target of 3.9 percent of gross domestic product for 2013, which it is expected to miss, and 3.6 percent for 2014.

The Commission has said it will take into account progress on structural reforms when deciding if progress towards interim targets has been sufficient.

"It's not the big shake-up required, we'll need to come back to that," said an EU official speaking on condition of anonymity.

"But even imperfect reform is better than no reform at all."

The Commission's latest projections for deficits and public debt across the 28-state EU, as well as the all-important forecasts for growth, unemployment and inflation, will be issued by EU Economy and Euro Commissioner Olli Rehn on Tuesday from 1000 GMT.

In its last forecast at the start of May, the Commission tipped 1.2-percent growth for the 17-state eurozone in 2014, with two of the euro currency countries -- not bailed-out Greece, but Cyprus and Slovenia -- predicted to remain in recession.

The forecasts for all are likely to be revised, the region having scraped out of a record recession in the second quarter but with the road to growth looking decidedly bumpy and slow going, judging by most of the recent economic data.

On the public deficit projections, the Commission can use these forecasts to open excessive deficit procedures that can now lead eventually to financial penalties on those states which do not meet the targets.

Spain is one to watch here, Madrid having until 2016 to get within the EU limit, as well as Portugal, which has firm interim targets demanded by international creditors in exchange for its bailout.

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http://www.globalpost.com/dispatch/news/afp/131104/brussels-takes-oversight-eu-budgets-deficits