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Tory budget clash in Europe

Gavin Hewitt | 12:58 UK time, Tuesday, 8 June 2010

UK chancellor's red budget box - file picA few days after the British election the Chancellor of the Exchequer, George Osborne, travelled to Brussels. He chose not to fight over new regulations being planned for hedge funds and private equity. Whilst there he made it quite clear that the new coalition government would not accept that the EU would be able to see budget plans before they were presented to Parliament. That message was underlined later by the UK prime minister and the foreign secretary.

So it will have come as a nasty surprise to learn that the President of the European Council, Herman Van Rompuy, is recommending that national budget plans are shared at EU level before they are presented to national parliaments. An unnamed French diplomat hinted that the idea was widely supported.

Now if the EU wants an early clash with the new British government this is a sure-fire way of going about it. The British will not accept it. "The budget will be presented to Parliament first," said Mark Hoban, Financial Secretary to the Treasury. He went on to say "there is no question of anyone other than MPs seeing it first".

The British position is that they don't mind if the eurozone countries agree to this. They had hoped that EU officials would limit it to the 16 countries that use the troubled currency. But it seems that some finance ministers want to extend this to all 27 EU countries.

What the EU officials want is to be able to adjust national budgets to try and reduce the imbalances between the economies that use the euro. It is by no means certain that the German people would agree to this and there are other countries that may resist what would be interpreted as an intrusion into their own affairs.

This is an argument that has a long way to run. The British will be implacable. What it does indicate is a determination on behalf of some EU members to use the crisis in the EU as a pretext to extend the EU's powers. It will be a battleground in the weeks and months ahead.


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