Euro nations may cede budget power to EU

The European Union would get far-reaching powers to rewrite budgets for eurozone countries that break debt and deficit rules, a draft of proposals suggests. The proposals, submitted to European capitals for review Monday night, are to be discussed at a leaders' summit of all 27 EU countries in Brussels Thursday and Friday, the Financial Times reported Tuesday. The authors of the draft -- European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, European Central Bank President Mario Draghi, and Eurogroup President Jean-Claude Juncker, representing eurozone finance ministers -- fine-tuned the proposals during a meeting Monday, said the newspaper, which saw the draft. The proposals are part of a larger plan to turn the eurozone into a closer fiscal union and give the EU powers to function as a eurozone finance ministry, the newspaper said. The draft does not call for immediate moves toward full-scale eurobonds, but suggests the EU study interim steps, including cooperation on short-term debt in certificates known as eurobills. The draft plan proposes that if a eurozone country breaks its debt and deficit commitments, the EU's executive body, the European Commission, would have the power to recommend detailed budgetary adjustments that would be put to a vote of all EU countries, the Times said. The budget amendments would be described as a "proposal" -- but the newspaper said the EU has strong new tools, including the ability to levy big fines, to punish countries that do not adopt such proposals. The report also outlines plans for a political union, the Times said. The eastern Mediterranean island nation of Cyprus Monday became the fifth country to apply for an international bailout, citing its banking sector's large exposure to the Greek economy. In Greece, the six-day-old coalition government suffered a setback Monday as its new finance minister, citing health issues, resigned even before he was sworn in.