Gödöllö, 11/04/2011 (Agence Europe) - EU27 finance ministers examined indicators to discern macroeconomic imbalance in the European Union at their meeting last week at Gödöllö, near Budapest. These indicators would be accompanied by upper and lower limits that would set alarm bells ringing. An indicator could be used, for example, to monitor real estate prices in a country to indicate when speculative bubbles might be about to appear, as occurred recently in Spain and Ireland. The final list will be decided upon as part of the inter-institutional negotiating process on six items of draft legislation to boost economic governance in Europe (see EUROPE 10337).
The Council of Ministers' Economic and Finance Committee submitted the following list of indicators to ministers, which EUROPE has seen: 3 year backward moving average of the current account balance as a percentage of GDP, with the a threshold of [+/]- 4% of GDP; net international investment position as a percentage of GDP, with a threshold of -35% of GDP; 5 years percentage change of export market shares measured in values, with a threshold of -6%; 3 years percentage change in nominal unit labour cost, with thresholds of +9% for euro-area countries and +12% for non-euro-area countries. 3 years percentage change of the real effective exchange rates based on HICP/CPI deflators, relative to 35 other industrial countries, with thresholds of [-/]+5% for euro-area countries and [-/]+11% for non-euro-area countries; private sector debt in % of GDP with a threshold of 160%; general government sector debt in % of GDP with a threshold of 60% [as a complementary indicator]; private sector credit flow in % of GDP with a threshold of 15%; year-on-year changes in house prices, with a threshold of 6%.
The president of the European Central Bank, Jean-Claude Trichet, said on Friday 8 April that the focus should be on monitoring European economies facing the greatest difficulties and this was simply a matter of realism. EU Economic and Monetary Affairs Commissioner Olli Rehn agreed with this, pointing out it is “important also to address current account surpluses by structural reforms to enhance domestic demand.” Mentioning the upcoming international summits of the IMF and World Bank in spring and the G20 Finance in Washington, he said on Saturday 9 April that it was important to reach agreement on indicative guidelines to be pursued to identify global macroeconomic imbalance, following the agreement on setting public debt, private debt and savings and balance of current transactions reached at the G20 finance summit in February (see EUROPE 10320). This, he said, would mean an ambitious macroeconomic surveillance action plan could be decided upon at the G20 summit in Cannes, France, in November.
The European Trade Union Confederation is concerned about the talks on economic indicators, particularly pay rise indicators, because they restrict the autonomy of social dialogue and negotiations between trade unions and employers, as it explains in a press release. The ETUC explains that a process of levelling down is underway because the table of indicators sets upper limits on increases of the cost of manpower, but makes no reference to the low pay levels earned by some workers, which need to be increased, and makes no reference to restricting the increasing proportion of national wealth seized by the rich or putting an end to the culture of sky-high bonuses. Some 30,000 demonstrated in the streets of Budapest on Saturday 9 April against austerity in Europe at a time when Portugal is preparing to introduce a structural adjustment programme in return for international financial aid. (M.B./transl.fl)