BRUSSELS (AFP) - The European Union should slap automatic sanctions on states which repeatedly run excessive deficits, Finland's prime minister said on Friday as the bloc considers steps to prevent a new debt crisis.

• Sweden slams new sanctions for fiscal laggards

Finnish Prime Minister Mari Kiviniemi said in Brussels that she backed a European Commission proposal to freeze EU budget aid to members which violate budget rules limiting deficits at no more than three percent of output.

"The communication presented by the commission Wednesday is most satisfactory and an important step towards a swift outcome," she told a news conference after meeting with European Commission chief Jose Manuel Barroso.

"And we are happy to observe that the sanctions promoted by Finland are moving forward," Kiviniemi said.

"The criteria to launch the implementation of the sanctions need to be clear and automatic and they must not leave room for political manoeuvering," she said, calling on the commission to "proceed quickly" with the proposal.

Barroso said that Europe needed "stricter and smarter rules" and that he wanted the commission proposal to be implemented "by the start of next year."

Under the plan, the EU would halt its aid for agriculture, fishing and poorer regions to states that fail to bring the deficits under the three-percent threshhold.

Europe is in the midst of an animated debate on how to tighten budget discipline after the Greek debt crisis rocked the value of the euro currency shared by 16 EU states, sparking fears it could reverse economic recovery.

The EU's Stability and Growth Pact requires states to keep their public deficits under three percent of national output and debt at no more than 60 percent of growth domestic product.

Most EU states have deficits that far exceed the three percent limit.

The current rules call for sanctions against budget sinners but none has ever been imposed because the procedure to activate them is lengthy and complicated.