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The European Union is to gain dramatic powers to control tax and spending in crisis-hit eurozone countries under a deal to save the currency.
The EU will have to agree the national budgets of heavily indebted countries under a deal to be signed tomorrow at a summit in Brussels attended by David Cameron.
The move will mean Greece losing control over its own budget, after Germany and the International Monetary Fund laid down increasingly harsh conditions for the indebted nation to receive its second £100 billion eurozone bail-out.
With the country on the brink of default, Christine Lagarde, the managing director of the IMF, yesterday revealed thata “fiscal compact” was set to be signed by European Union leaders at their summit tomorrow.
The move to closer integration between the eurozone economies comes just days before Tory Euro-sceptics launch a campaign to repatriate powers over policing and justice already handed to the European Union.
Conservative MPs will put pressure on the Prime Minister to harness a “block opt-out” that will allow Britain simultaneously to withdraw from European Arrest Warrants, compulsory sharing of data with other police forces, and more than 100 other laws handed to Brussels.
They will be angered by the EU’s new powers over eurozone countries, which will see institutions paid for by all of Europe’s taxpayers concentrating more of their staff and resources on members within the zone.
Euro-sceptics also strongly oppose harmonisation of taxes. But global leaders see closer integration of the eurozone economies as the only answer to the ongoing debt crisis.
Mrs Lagarde, speaking at the World Economic Forum in Davos, said: “In addition to having a monetary zone, the eurozone needs to develop this fiscal consolidation compact that is currently under work and that we hope will be validated on Monday at the leaders summit.”
A leaked EU document revealed German plans for Greece to agree all its spending plans with a eurozone “budget commissioner”, who would have the power to veto tax and spending plans.