GETTY The IMF recommends giving EU states more funding - even if they break budget rules

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The union’s attempts to limit the size of government budget deficits and debt are being ignored without punishment, according to the International Monetary Fund (IMF). And the IMF claims the only way to keep them playing by the rules, is to use subsidies as “political incentives”. Eurozone members showed a “poor record of compliance with the key rules” from 1999 to 2015, according to an IMF report released yesterday.

Incredibly, the report said EU states needed a carrot, rather than a stick, if they were to be trusted to play by the rules. The report said: “If political incentives are not there, the most sophisticated revisions to the framework will not materially improve fiscal outcomes. "One possibility involves linking the volume of structural funds and other EU subsidies to compliance with the rules.”

The IMF said fining a country already in fiscal trouble only made matters worse and financial penalties should be applied before the limit was broken, when the EU takes action to prevent the breach of the ceiling in the first place. Under the rules, a country that breaks the budget deficit limit of 3 percent of gross domestic product and ignores EU calls to bring the shortfall down again, can eventually face fines of up to 0.2 percent of GDP. The report called for more application of such punishments, adding: “More emphasis should be placed on sanctions under the preventive arm, while non-pecuniary sanctions could also be considered under the corrective arm.”

GETTY The IMF believe states should be rewarded for playing by the rules - not punished for breaking them

UKIP MEP and Chairman of the libertarian think tank The Indigo Group Bill Etheridge said the report showed the Euro is a “fundamentally flawed currency” which has “wreaked havoc across the continent.” He added: “It therefore comes as no surprise to me that countries are breaking the arbitrary rules which only Luxembourg met in the first place when the currency was created.

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The EU is a political project, not an economic one, which has caused poverty and misery UKIP MEP Bill Etheridge

"This is a political project, not an economic one, which has caused poverty and misery, yet there are still people in the UK who want us to be trapped in this economic sinking ship. "The response of the IMF, which is just another wing of the EU, is to link structural funds to countries that can keep within the net borrowing requirements laid out in the Maastrict Treaty. It's rewarding someone for misbehaving at the cost of countries like the UK who sensibly stayed out but still have to fund this project whilst the government dawdles over Brexit."

GETTY The IMF has admitted it seriously underestimated how Britain's economy would respond to Brexit

Mr Etheridge contrasted this behaviour to the reaction of the EU and europhile politicians in the UK over Brexit "Isn't it a coincidence that EU Treaties can be broken at will if it's a project Brussels and the euro establishment want to keep going, but all hell breaks loose when it's the will of the people instead?"

GETTY The EU has been accused of letting states break financial rules