ECONOMIC GOVERNANCE : EU GETS TOUGHER ON INDEBTED STATES.

• Position: European Union

The European Commission will reveal plans, on 23 November, to place indebted or economically distressed states under closer supervision in a bid to prevent financial problems spreading throughout the single currency zone. The proposals also lay out options for eurobonds, including a suggestion for countries using the bonds to be placed in "some form of administration" if they are in danger of reneging on their interest payments.

The changes, set out in two regulations that will sit alongside the recently signed economic governance package, will empower eurozone countries to bounce a state into taking a bailout. They also provide for much greater intrusion by the Commission into the national budget-making process and allow EU funding to be suspended when a state fails to abide by Commission recommendations. Commission President Jose Manuel Barroso said, on 22 November, that the plans were "extremely important" for eurozone credibility. "If we want to have a common currency we also have to share some principles of discipline," he said. "We need strong institutions that have the power to act."

SURVEILLANCE

The Commission intends to introduce extra budgetary requirements for countries under the excessive deficit procedure - currently all of the EU's member states bar Sweden and Estonia - and for countries under bailout programmes or "experiencing or threatened with serious difficulties with respect to their financial stability" - this would include Greece, Ireland, Portugal and Italy, which have agreed to allow the EU and International Monetary Fund to supervise their fiscal and economic reforms.

All eurozone countries are being asked to submit three-year budget plans to the Commission in April, draw up and submit draft budgets for the following year by October and adopt the final budget law by December. They are also being told to introduce binding spending limits, preferably in their constitutions, and set up independent fiscal councils. Eurozone states in excessive deficit - those that have crossed a deficit threshold of 3% of GDP set in the Stability and Growth Pact - would be forced to report back every six months on their progress and make changes to their budget plans if requested by the Commission.

For distressed or bailout countries, an extra layer of surveillance is added, giving the...