Brussels, 10/11/2009 (Agence Europe) - Noting the European Commission's autumn economic forecasts (EUROPE 10011), eurozone finance ministers expect difficult times ahead when it comes to public finances and unemployment. Spain's Finance Minister Elena Salgado, who chaired the Eurogroup in Jean-Claude Juncker's absence, pointed to this on Monday 9 November when addressing the press, underlining that “restoring public finances and tackling unemployment will be the priorities from now on”.
The labour market situation differs considerably from one member state to the next, Ms Salgado said, setting out five common principles referred to by the Eurogroup to face difficulties encountered. It is, she said, necessary to: address segmentation of the labour market, support general employability, reduce benefit dependency, support wage formation in line with productivity, and increase effective retirement ages.
If there are to be sustained efforts to put public finances in order beginning in 2011, this could take longer than the Commission would like. “We have all agreed that, provided the central scenario of our forecast is confirmed, 2011 will be the year the euro area should start, on aggregate terms, its fiscal exit”, stressed Joaquín Almunia. Aware that the exit strategy should be differentiated according to the specific situation in each country, the commissioner for economic and monetary affairs recognises that the situation is not trouble-free when it comes to implementing the Stability and Growth Pact (SGP).
For the first time since the creation of the single currency, 13 of the 16 members of the eurozone will be faced, at the same moment, by an excessive deficit procedure, Almunia said, two days before the College's decision to officially open such a procedure against nine new member states. After having adopted reports along these lines with regard to Germany, Austria, Belgium, Italy, the Netherlands, Portugal, Slovakia, Slovenia and the Czech Republic (EUROPE 9993), the Commission will, on Wednesday, formally note the existence of excessive deficit (Article 104§5 and 6) and prescribe a course of adjustment for these countries. Above all, it will take stock of the way five countries already concerned by such a procedure have implemented the previous Council recommendations (these countries being Spain, France, Ireland, Greece and the United Kingdom).
Although the situation requires a horizontal vision of things, “differentiation will need to provide a global picture that demonstrates equal treatment or fair treatment for everybody, so (…) the Commission will be very keen on avoiding discriminatory treatments” from one country against the others. For Greece, the matter is agreed and, on Wednesday, the Commission will cross another stage in the procedure, noting that the country in question has not taken the expected measures to reduce its deficit (for which the level was considerably reviewed upwards following further statistical slip-ups). The judgement relating to the other countries will be less severe as these countries should be granted one more year in which to bring their deficits down below the 3% of GDP mark, with recommendations of certain measures to be taken. Given the deterioration in the economic situation, the new time limits would thus be 2013 for France and Spain, 2014 for Ireland and 2014-2015 for the United Kingdom.
In the case of France, this new deadline leaves Finance Minister Christine Lagarde perplex. “It must be realistic to be credible”, she said after the meeting, as reported by AFP, with Paris anticipating a return below the 3% threshold in 2014, for now. Although, according to Commissioner Almunia, the calculation of deficit in France should “also take into account the impact of the major loan” currently envisaged, Ms Lagarde considers it would be preferable to wait until “its size, its objective and its management” have been defined. On the subject of Germany, Commission concern relates to the tax reductions announced for 2011. For his first meeting of the Eurogroup, the new German finance minister, Wolfgang Schäuble, appeared “fully committed” in favour of application of the SGP and “understands extremely well how the pact should be implemented in these difficult times”, Commissioner Almunia pointed out. The date 2013 should be assigned to Germany for returning below the 3% of GDP level. He went on to observe: “When one is listening to Minister Schäuble, one immediately has the impression that one is listening to a very credible politician”. (A.B./transl.jl)