Automatic sanctions agreed for breaching EU debt rules

EU finance ministers are in talks in Luxembourg to complete an overhaul of EU budget rules, the Stability and Growth Pact, and agree on a report for EU leaders on how to make the rules tougher, to prevent a new sovereign debt crisis.

"There is an agreement on ... a significantly strengthened preventive action and a significantly strengthened system of imposing sanctions," Polish Finance Minister Jacek Rostowski told reporters on leaving the meeting.

"We are going in the right direction. There is also a high degree of agreement on the permanent system of crisis resolution. We can be satisfied with progress made."

The changes to the Stability and Growth Pact are the biggest overhaul of the fiscal rules underpinning the euro since its creation in 1999.

One of the thorny issues was how much ministerial discretion would apply in deciding sanctions, which would take the form of interest-bearing and non-interest bearing deposits and fines.

Sources close to the talks said that despite the opposition of a group of countries led by France, the ministers backed a proposal of the EU executive arm, the European Commission, that only a qualified majority of ministers could stop such sanctions – or what the Commission calls reverse majority voting.