EU summit to call for budget deficit "exit strategy"

Brussels - European Union member states will use a summit Thursday to debate a 'credible exit strategy' from their soaring budget deficits in the wake of the financial crisis, draft documents revealed Tuesday. The 27-member bloc 'reaffirms its strong commitment to sound public finances' and sees a 'clear need for a reliable and credible exit strategy,' a draft declaration prepared for the summit and seen by the German press agency dpa says. In deference to strong protests from Britain, which is fighting tooth and nail to maintain London's independence as Europe's top financial centre, the draft statement calls for a system based on national regulators, together with three new, EU-wide supervisors, 'with shared and mutually reinforcing responsibilities.' Given the massive amounts EU governments have already poured into their economies in a bid to stave off a deeper recession, 'further budgetary stimulus would not be warranted,' the statement warns. Under the EU's rules, national governments are supposed to limit their budget deficits to 3 per cent of gross domestic product. The crisis has pushed a slew of member states through that mark. According to figures from the EU executive, the European Commission, 21 member states are set to breach the limit this year. Thursday's summit is also set to fill in some of the details on how to create the controversial EU-wide system to detect future financial crashes. The draft calls on the commission to propose laws to that effect by the early autumn - the clearest time-frame given to date. However, there is likely to be a heated debate over the draft statement before it is adopted by EU leaders. 'It's political, but it's also extremely technical, so we might move forward on certain issues, but we won't solve the whole issue of financial supervision,' Sweden's minister for European affairs, Cecilia Malmstrom, said on Monday. Sweden is set to take up the EU's rotating presidency in July, and will have to steer the debate on financial regulation.