Brussels, 03/03/2011 (Agence Europe) - Negotiations on the package of six legislative texts which seek to strengthen economic governance have scarcely progressed since the Ecofin Council in February (see EUROPE 10316). On Wednesday 2 March, member states' ambassadors to the EU noted that the dozen or so issues that had still to be resolved remained on the table. There is unlikely to be any change in the situation before the Ecofin Council on Tuesday 15 March, a few days after the eurozone summit and just before the important spring European Council, both of which are intended to bring a full response to the euro area's debt crisis.
One of the thorny issues relates to enhancing monitoring of public debt. All the member states, with the exceptions of Italy and Greece, have accepted that a numerical benchmark be introduced, compelling them to reduce the excessive portion of their debt (above 60% of national GDP) by 5% per year. This provision will apply three years after the abrogation of the excessive deficit procedure for countries against which such a procedure had been opened when the provision came into force. Greece is now prepared to withdraw its reservation on this matter if it receives assurances that the sanctions proposed in the event of infringement will not apply so long as it meets the terms of the economic adjustment programme which its is implementing in exchange for international financial aid.
Since the debt dynamic is not determined solely by budget deficit, other relevant factors will be taken into account in assessing whether the debt reduction trajectory is sufficient, the Hungarian Presidency says in a document of 1st March, taking stock of the discussions. Italy says that the level of private indebtedness must be included in these factors. It links this issue to the numerical benchmark suggested initially by the European Commission. On Wednesday, Italy had adopted a more conciliatory attitude, an observer revealed.
Including private debt among the factors for assessing public debt is not to the liking of all the member states. It would be “opening Pandora's box”, said the same diplomat, highlighting that there is no methodology for quantifying private indebtedness. On Wednesday, Finland warned against weakening the public debt criterion which would bring the overall balance of the package into doubt. It proposes two options: speeding up the process of consolidating public finances (that is to say, reducing the transitional period) and restricting the relevant factors. Bulgaria, Luxembourg, the Netherlands and Slovenia concurred. (M.B./transl.rt)