Brussels, 15/05/2012 (Agence Europe) - By a narrow majority on Monday 14 May, the European Parliament's economic and monetary affairs committee decided on its position on two draft regulations (the “two-pack”) adjusting the Stability and Growth Pact for eurozone countries, despite attempts by the Social Democrats to have the vote postponed. The split is along a broadly left-right divide, with the right favouring spending cuts and the left preferring to focus on growth, which will prevent the MEPs from entering negotiations with the Council of Ministers and means that a vote will be needed at plenary.
“As each day counts in the prevention of further debt crises from occurring in the eurozone, Socialist MEPs are responsible for the delay in European decision-making on crucial measures”, commented Jean-Paul Gauzès (EPP, France), one of the two rapporteurs. He explained in a press release: “Strangely, although they had voted in favour of all compromise amendments (…), MEPs from the S&D Group abstained from the final vote on the two reports. But approving all compromises should have led them to a positive vote, and thus to a large majority in favour of both reports.”
The MEPs are going along with the aim of each eurozone country reducing its structural deficit to 0.5% of GDP, as laid down in the fiscal compact, but have removed any reference to the golden rule being added to countries' constitutions. The job of monitoring respect of the rules is in the hands of the European Commission, which has been given greater powers to this end.
Growth. The committee says that public spending cuts must not hinder economic growth in the eurozone. Elisa Ferreira, the other rapporteur on this package said: “A decisive step to ease the burden of austerity in Europe has been taken. Even Conservatives are beginning to understand that without growth, efforts to reduce deficits and public debt are doomed to failure. However, it is not about going back on the commitments taken to establish budgetary discipline. Nonetheless, it is crucial to leave member states some flexibility to support economic activity through investment”, and she recommended that productive investment be deducted from public deficit calculations (an idea rejected by the Eurogroup).
The MEPs explain: “Both texts stress the need to ensure that fiscal monitoring does not hamper growth. The Commission's country-by-country assessments would therefore need to ensure that budget cuts are not made at the cost of killing off investments with growth potential. Moreover, for countries being asked to undertake significant cuts these efforts must not harm investments in education and healthcare. The deficit reduction timetables would be applied more flexibly in exceptional circumstances or in a severe economic downturn.” Flexibility of this nature could be used by Spain to end its austerity-recession-austerity spiral, suggested Pascal Canfin (Greens/EFA, France). It is worth noting that the MEPs are considering the creation of a growth instrument which would mobilise around 1% of GDP per year over a ten year period for infrastructure investment.
Redemption fund. To the delight of the Liberals, most MEPs now favour the setting up of a redemption fund for sovereign debt (for the temporary pooling of excess debt in the eurozone), an idea mooted by German economists. The leader of the Liberals, Guy Verhofstadt of Belgium, said: “Member states must take this proposal seriously when they now meet to draw up a Growth Strategy for Europe” and urged the Commission to carry out a feasibility study this year and draw up a roadmap for the introduction of eurobonds. The Liberals also suggest annual EU coordination of sovereign debt emissions. (MB/transl.fl)