Brussels, 20/04/2011 (Agence Europe) - The European Parliament's economic and monetary affairs committee was divided over the idea of tightening up the Stability and Growth Pact (SGP) rules, during its mammoth voting session on Tuesday 19 April, on six items of economic governance legislation (see EUROPE 10362). The Right wing see balancing the public budget as key, and this won the day over the Left's idea of leaving member states greater room to manoeuvre in their investment for the future. Despite this split, the MEPs decided to immediately enter talks with the EU Council of Ministers, warning that they are counting on playing their role as co-legislators to the full. The MEPs are not promising that the legislation will be ready for adoption in June 2011, as requested by the European Council.
The biggest splits between Left and Right are on the regulation amending the preventative measures in the Stability and Growth Pact. “It's really a pity S&D/Greens could not give support” to my draft report, commented Corien Wortmann-Kool (EPP, the Netherlands). Sylvie Goulard (ALDE, France) said: “For ALDE, strengthening of discipline is important, and this is why we voted in favour. But we want a 'discipline plus.' Rules have to give incentives as well. So we ask the European Commission to enter into real analysis on pros and cons of Eurobonds in a global context.” Vicky Ford (ECR, UK) said that unlike what the Social Democrats believe, debt generated for investment processes is still debt as far as the Stability and Growth Pact is concerned. This was echoed by Carl Haglund (ALDE, Finland): “In my country, we have had bad experiences and we learnt from mistakes and that's why we are in fairly good position today in Finland. We still allow with SGP 3% deficits, which in a sense is 3% too much. Within these limits, it is possible to handle necessary investments in the future.”
The SGP “has very often been a king of straitjacket for member states”, said Elisa Ferreira (S&D, Portugal). She said she was “in favour of an interpretation that brings together short-term nominal compliance of SGP with the prospect for growth and convergence” (see EUROPE 10359). She added that despite some improvement, “the vote was a split vote between Left and Right-wing parties” and hoped it would be possible to enter proper talks with the Council of Ministers. “A majority of the Conservatives and the Liberals were not ready to support us in defending investment to boost growth and job creation”, particularly in transport, energy efficiency, education and research, said Udo Bullmann (S&D, Germany). On behalf of the Greens, Belgium's Philippe Lamberts criticised the Centre-Right's refusal to countenance the idea of putting the EUROPE 2020 objectives on a par with the demand for budget consolidation. He said their refusal would make the most vulnerable members of the population and future generations pay the cost of the adjustments required by the SGP objectives.
On Wednesday, the committee decided to enter immediate negotiations with the EU Council of Ministers. “If we want to convince markets, then member states have to stop to defend their proposal”, said the head of the ALDE Group, Belgium's Guy Verhofstadt. We will have to wait to see the Council's reaction before we can say whether agreement will be possible in first reading or whether a vote will take place in plenary, said Sylvie Goulard, warning that the EP was serious about making penalties automatic. Welcoming the vote at the EP, the Hungarian Presidency issued a press release in which it says it will do all in its power to encourage final agreement by June this year.
Automatic penalties. MEPs agree across the board that member states' wriggle room needs to be restricted when it comes to penalties for failing to apply the SGP to prevent them getting round sanctions (as occurred in the past). At all stages of the proceedings, the MEPs have introduced a “reverse qualified majority” rule whereby a Commission recommendation is deemed accepted unless a qualified majority of countries oppose it. Wortmann-Kool said that this should reduce the amount of political horse-trading among ministers on the Council. She said there would be tough negotiations over this issue, while Verhofstadt commented: “We do not believe member states will be able to control and sanction themselves.”
The MEPs have introduced a new penalty for when a country deliberately submits false statistics. A fine of 0.5% of GDP has been introduced to this effect. Generally, the penalties initially suggested by the Commission could be applied at an earlier stage in the proceedings, before the Council of Ministers decides that a country is not applying the recommended corrective measures. The MEPs have increased the scale of the fines on countries experiencing excessive macroeconomic imbalances.
Debt reduction. The EP's economic and monetary affairs committee has relaxed the criteria for reducing excess public debt (defined as debt of above 60% of GDP). It has decided for an average 5% reduction over three years, but the member states want excess public debt to be reduced by 5% each year after a transition period. “The rule for the rhythm of reduction of the debt at an average rate of 1/20 over a 3-year period introduces more flexibility, introducing additional relevant factors that the European Commission should take into account when assessing member states' compliance”, commented Diogo Feio (EPP, Portugal), the rapporteur on the corrective arm of the SGP. Pascal Canfin (Greens, France) said that, when validating the idea of reducing debt to 60% of GDP in all eurozone countries over 20 years, the EPP and the Liberals validated an objective that cannot be reached by the most indebted countries. He added that it would make more sense to give member states the resources to raise taxation on multinationals and the rich, who fully benefit from fiscal competition within the EU.
Macroeconomic indicators. Elisa Ferreira welcomed the vote on her draft report on the new macroeconomic imbalance scrutiny procedures. The idea is that a scoreboard of indicators should be set up to assess the situation in the various member states. She said: “Crucial elements have been included: the scoreboard includes some real economic variables, some social elements, rights of workers have been protected in the context of recommendations put forward…. We made sure that the assessment of macro-economic imbalances should not affect fundamental rights, in particular the right to negotiate, conclude and enforce collective bargaining…. We also made sure that countries with current account surpluses will be checked. These countries also need to be closely monitored because their surpluses often reflect weaknesses in domestic demand”. She was referring here to countries like Germany whose high level of exports is an indicator of low domestic demand.
The committee believes that member states must take the EU's new rules on board, and calls for greater transparency in decision-making. As occurs in the monetary talks with the ECB, it suggests that the EP set up a form of economic dialogue. If a country is asked to change its labour law, for example, then there should be a cross-border debate on the issue so that the country concerned can explain the problems facing it, explained Sylvie Goulard. (M.B./transl.fl)