Brussels, 28/09/2010 (Agence Europe) - On Monday 27 September, the economic governance working group, chaired by Herman Van Rompuy, discussed the proposals that the European Commission would be putting forward on Wednesday to reform the Stability and Growth Pact (SGP). In a press release published at the end of the meeting, the president of the European Council referred to the “high level of convergence” on questions related to economic and budgetary supervision. Nonetheless, differences remain between member states, particularly with regard to the automatic nature of sanctions that could be inflicted on countries that infringe the revised SGP. The taskforce on economic governance will present its final report to the European Council in October.
Excessive debt procedures launched within the revised SGP will focus more on the situation of national public debt. Van Rompuy indicated that “a country would be subject to an excessive-deficit procedure even with a deficit below 3% if the debt is above 60 % and the path of debt reduction considered as unsatisfactory”.
According to the European press, the Commission is expected to propose a mechanism with which a member state, whose excessive deficit diminished at an annual rate of below 0.5% of GDP, would be obliged to develop a financial deposit of up to 0.2% of its GDP. This funding would be taken out of Community funds and would normally go to the member state in question when it began to respect European rules again. Under the SGP, any member state failing to meet these criteria would at some stage be able to recuperate the set-aside funds. This sanctions mechanism would only apply to eurozone countries. Van Rompuy explained that “sanctions would be introduced at an earlier stage, be more progressive and rely on a wider spectrum of enforcement measures”. He added that “as a first step and on the basis of the Commission upcoming proposals, sanctions should be strengthened in the euro area. Conditionality for the use of EU funds linked to the fulfilment of the obligations under the Stability and Growth Pact should also be introduced as soon as possible”. The possible confiscation of European funds does exist in current European rules and has never been applied.
Automatic nature of sanctions. The question of the automatic nature of applying these sanctions is a highly political issue and is at the heart of this mechanism. The more these sanctions become automatic, the more the Commission will see its power in this mechanism reinforced and fewer member states will be able to prevent themselves from being sanctioned. This is supported by countries in favour of a strict regime, such as Germany and the European Central Bank (EUROPE 10223). The Commission will argue that the proposals for applying sanctions be adopted unless a qualified majority of member states are opposed to it. This quasi-automatic nature of sanctions is not to the liking of France. On Monday evening the French minister for finance, Christine Lagarde, emphasised that “automatic application does not appear to us as being compatible with the necessary political approval”. She called for a decision to be made by simple majority voting. In his declaration, Herman Van Rompuy does not tackle this question but implicitly recognises the existing divergence between member states: “Whenever possible, decision-making rules on sanctions should be more automatic and based on a reverse majority rule, implying a Commission proposal is adopted unless rejected by the Council”. Reform of the SGP involves an economic pillar, which will complete the current budgetary pillar. The president of the European Council asserted that “the objective is to better monitor competitiveness developments and to prevent the occurrence of harmful imbalances, bubbles and negative spill-over effects within the EU and the euro area”. According to Van Rompuy, corrective measures to ensure respect for the rules could be implemented, “particularly in the eurozone”. The European Commission intends to introduce close supervision of these imbalances by way of a scoreboard indicator. Addressing the European Parliament in mid-September, Olli Rehn, the commissioner for economic and monetary affairs, declared that “we will create a scoreboard of economic and financial indicators and carry out in-depth country analyses. When necessary, country-specific recommendations will be addressed. Euro area members who show insufficient compliance with their respective recommendations could also face sanctions”. In his opening speech at the annual French EUROFI think tank conference on Tuesday 20 September, José Manuel Durão Barroso, declared that the forthcoming proposals from his institution were fostered within the consensus obtained at Van Rompuy's working group to “monitor and address imbalances better, improve budgetary surveillance, look at government debt in a more sustained way, and give real teeth to the Stability and Growth Pact. Greater stability at macroeconomic and market level is an essential foundation for the major structural changes needed in our economies”. (M.B./transl.fl)