Luxembourg, 08/06/2010 (Agence Europe) - Reflection by the working group on coordinating economic policy is taking shape. Herman Van Rompuy, the president of the European Council, was pleased to point out during the evening of Monday 7 June that: “We have been able to translate the commitments of the first meeting into more concrete proposals on two main issues” - strengthening of budgetary discipline and closing the gaps in competitiveness. “In these two areas, rapid progress can be made”, he told the press after the second meeting of the taskforce under his chairmanship. The question of setting a permanent crisis management mechanism in place and that of improving economic governance, the two other objectives identified after the first meeting (EUROPE 10145), will be evoked during the next meeting on 12 July. In the meantime, the president of the European Council will take stock of progress made in work with the leaders of the 27 member states at the European Council summit on 17 and 18 June.
Progress made during this meeting on the strengthening of budgetary surveillance within the framework of the Stability and Growth Pact (SGP) falls into four categories, Van Rompuy said, adding that this will result in “a new way of working”. Although the SGP already contains sanctions, these only intervene at the last stage in procedures, when there is a need for tools throughout the multilateral surveillance process, he explained, noting that “everybody agreed today on ways and means to review the fiscal situation of member states at an earlier stage, and in a more graduated way”. Of what would this consist?
(a) Albeit disparaged by national parliamentarians, the idea of a “European semester” is a major breakthrough. Each year, in the spring, the member states would present their draft budgets to the Commission and to their European partners, before these are put to the scrutiny of national parliaments. Disturbed by such an idea, the latter in their concern state they see this as an attack on their sovereign prerogatives. As the Commission had suggested, Van Rompuy underlined the fact that this preliminary inspection would be on the broad lines and not go into details. It would above all allow finance ministers to verify the macro-economic hypotheses on which each draft budget is based, such as the level of growth or inflation, as well as the main economic aggregates, such as receipts, spending and deficit objectives. Progress would be significant and would heighten peer pressure as the timetable would allow each country to correct its aim in relation to the remarks received from its partners. It would also strengthen the credibility of the budget when presented and discussed before national parliaments. “Of course, we need to take into account the specificity of some countries”, Van Rompuy said, speaking of the United Kingdom.
(b) The question of sanctions is just as important within the strengthened mechanism. “We will also improve the Pact by creating more sanctions earlier on”, Van Rompuy said. These sanctions, the content of which was not specified but which will be essentially financial, could intervene before the 3% deficit threshold is reached, for example, if prior warnings have not been heeded or if the level of debt increases inordinately. Herman Van Rompuy went on to “use the traffic light image”, saying: “Until now, you only got fined when driving through the red light of the 3%. From now on, you could also be in trouble when crossing the orange light”. One has therefore to determine what one means by “orange”. For this, “we have to define a new set of sanctions - more progressive and consistent” and the Commission is invited to deliberate on this. Although there are “no taboos” within the taskforce, suspension of voting rights (an initiative defended by Germany) appears as a more complicated option. “Everyone is aware that non-financial sanctions require treaty amendment”, Van Rompuy pointed out. At this stage, “treaty amendment is not to be ruled out but focus has mainly been on what can be done in the near future and within the framework of the current treaty” (which does not allow non-financial sanctions to be decreed). He went on to add: “We shall say later whether amendment of the treaties is possible, by consensus, and if, in that context, it is possible to envisage non-financial sanctions”.
(c) Another element on which there is agreement in the context of the strengthened SGP is for the public debt to be taken more into account. One idea could be to trigger excessive deficit procedure if reduction in the debt is not sufficiently rapid (this is tantamount to making the 60% GDP debt threshold a more decisive element).
(d) Finally, member states support the idea of greater independence for national statistical offices compared to the political body in power.
In addition to the improvements envisaged to budgetary surveillance and SGP, the working group looked more closely at the question of competitiveness surveillance. Here also, it is a matter of amending procedure, with the aim of reducing differences that can be particularly detrimental to the eurozone. “For some economies, membership of the eurozone has acted as a 'sleeping pill'”, Van Rompuy said, adding that it is now necessary to avoid a “rude awakening” by the market forces. The Commission, as it has undertaken to do, will develop a series of indicators likely to raise the alarm in the event of growing divergence between member states. President Van Rompuy is personally also in favour of establishing correcting measures if differences persist in respect of competitiveness (in this case, reduced access to European funding, as in the case of insufficient budgetary consolidation). (A.B./transl.jl)