By Jan Strupczewski and Marcin Grajewski
BRUSSELS, Sept 23 (Reuters) - The European Commission is to propose next week that euro zone countries which do not move towards budget balance should make an interest-bearing deposit of 0.2 percent of GDP as a penalty, EU sources said.
The proposal, which the European Union executive is to present on Sept 29, is part of efforts of the 27-nation EU to put public finances on a sustainable path after the global economic and financial crisis wreaked havoc in national budgets.
Tougher rules would help prevent another sovereign debt crisis, like the one triggered by Greece and regain the confidence of financial markets in government debt policies.
EU finance ministers grouped in what is called the Task Force have been working on toughening EU budget rules, the Stability and Growth Pact, since May.
The deposit of 0.2 percent of GDP would have to be made if the country did not cut its deficit by at least 0.5 percent of GDP a year until government books are close to balance or in surplus, said one EU source familiar with the proposal.
"In case of a recurrent or a particularly serious deviation from this (target of deficit reduction), there would be an interest bearing deposit that could be 0.2 percent of GDP," the source said.
A second EU source familiar with the proposal confirmed the size of the deposit.
The sanctions would then be stepped up in case of repeated non-compliance.
"The next level would be non-interest bearing deposits which could later be transmuted into fines," the source said.
While the rule of a 0.5 percent of GDP annual reduction in budget deficits already exists in the Stability and Growth Pact, it is not backed by any enforcing mechanism and therefore has often been ignored.
"This is about making operational the medium-term budgetary objective," the EU source said, referring to the budget close to balance or in surplus.
The source noted the sanctions mechanism was firmly focused on euro zone countries and therefore not requiring a change of the existing EU treaty.
The Commission is also to propose that interest bearing deposits would have to be made for not reducing a country's debt to the EU threshold of 60 percent of gross domestic product, with a similar progression of sanctions as with the deficit reduction, the source said.
Whether the pace of debt reduction was satisfactory or not would be established "through the adoption of a numerical benchmark to gauge if the debt ratio is diminishing towards the 60 percent of GDP threshold," the source said.
The Commission will also propose that it would monitor a country's macroeconomic performance according to a scoreboard of indicators and issue policy recommendations to a country which shows persistent macroeconomic imbalances.
"There would be an excessive imbalances procedure, with a step up regime and peer pressure enforcement in the EU and which would include penalties for euro zone countries -- like interest bearing deposits, etc," the EU source said.
The reason why euro zone countries would be more exposed to sanctions than EU countries outside the 16-country single currency area is that the euro zone members are much more economically interdependent on each other, the source said.
(Reporting by Jan Strupczewski, editing by Ron Askew)