Barroso :Eurozone facing 'systemic crisis'

EU leaders called Wednesday for Brussels to gain new powers to rewrite national budgets, in a radical step deemed necessary to ensure the euro survives. European Commission President Jose Manuel Barroso said officials from the EU executive must be able to demand changes to national budgets before they are adopted by domestic lawmakers. "We are indeed now facing a truly systemic crisis that requires an even stronger commitment from all -- and that may require additional and very important measures," Barroso told the European parliament. The call comes amid concerns that democratic principles are being undermined in seeking to overcome the debt crisis, with former EU officials taking over emergency governments sought by the EU in Italy and Greece. Supplanting national sovereignty over control of public finances would be a huge step in the evolution of the European Union which tried and failed to ensure disciplined economic convergence via successive pacts since the euro's creation in 1999. At present, governments are only obligated to share their national budget planning with the EU, already a recent innovation. But both Barroso and EU president Herman Van Rompuy said the time had come to agree far tighter surveillance by the Commission. "Without this increased convergence, we will not be able to sustain the common currency -- this is the truth," said Barroso. Luxembourg Prime Minister Jean-Claude Juncker -- who chairs the influential eurozone finance ministers grouping -- also took part in the three-hour debate. The trio are working on proposals to strengthen the eurozone which will be put to Europe's leaders at a December 9 summit, and each said the interests of the EU whole must supersede the sum of its parts. Van Rompuy warned that the Commission could be required to "intervene" as national budgets are drawn up. And to clamp down on countries breaching budget rules, he said he would consider stronger sanctions, from suspending their voting rights to freezing EU funds for infrastructure projects. The Commission will unveil next Wednesday a set of proposals for Brussels to step up surveillance of bailed out nations as well as governments with runaway deficits. Barroso said he would also present proposals for jointly-backed eurobonds, which Germany has opposed in the absence of meaningful pan-eurozone economic governance, by the end of the year. A British diplomat said it was a "safe assumption" that tighter budget overshight would not apply to Britain. The crisis has caused tensions between the 17 nations using the euro, led by economic powerhouses Germany and France, and the EU's 10 other states including Britain. The split was evident this week with German Chancellor Angela Merkel calling for "more Europe" modelled on good German housekeeping, while British Prime Minister David Cameron threatened to repatriate powers already given to the EU. In Berlin on Wednesday, Merkel said Europe had "still not given a sufficient answer to the question of the eurozone's future." Berlin is pushing for sanctions to be enforced by the European Court of Justice. Van Rompuy said the number one priority was to "safeguard the stability" of the 17-nation eurozone. "The biggest split we could have in Europe will be if we can't manage to guarantee eurozone stability," he said, adding that all EU states are "in the same boat" fighting to overcome debt, recession and disparate economic performance. Juncker said it was for this reason that the EU was striving to remove areas where unanimity across the 27 governments is required to make changes to the way it goes about its business. He cited complaints that financial markets work "much quicker than democracy." Some deputies in the parliament took umbrage at the trend for centralised Brussels control, with Czech conservative Jan Zahradil denouncing a "dictatorship run from Brussels, Frankfurt, Berlin and Paris."