Brussels, 18/12/2012 (Agence Europe) - On Tuesday 18 December, Euro Commissioner Olli Rehn unveiled three reports to help eurozone finance ministers find the best policy mix for cutting macroeconomic imbalances and ensuring affordable public finances and high-quality public spending. He said that the reduction in the current account surpluses of countries like Germany would help reduce imbalances, but was not a panacea and would not in any way reduce the pressure on countries in deficit to introduce structural reforms.
Rehn said: “Rebalancing is now under way in the eurozone. In deficit countries, it's going on through deleveraging. In surplus countries, domestic demands are increasing. The impact of this should not be overestimated. There is no panacea, no silver bullet. Increased demand in Germany increases demand in neighbouring countries rather than southern countries, which is a desirable effect, but not an alternative to structural reform in deficit countries. The study suggests that eurozone rebalancing is not detrimental to competitiveness of surplus countries vis-à-vis the rest of the world.”
The report on sustainable public finances identifies a number of short-, medium- and long-term challenges. In the short-term, risks have fallen in virtually all member states, explains the Commission, compared with 2009, when two-thirds of member states had crossed the critical threshold.
Given the pressure of healthcare spending and retirement pensions, further budget cuts of 4.75% of GDP seems to be necessary to get the average EU27 debt below the 60% cap by 2030, a 3% cut (of the total 4.75%) expected in the next two years. This varies widely from one member state to another in line with their individual budget situation. Public debt remains high in the EU27 and in the very long term, the ageing population will make reform in the pension field necessary to keep public finances on a sustainable track.
Olli Rehn commented: “Member States should do more to prioritise growth friendly public investments in education, research & innovation, private-public procurement investments. The Stability and Growth Pact already takes this into account and the European Commission is exploring further ways so that some investments could qualify for a temporary deviation of adjustment path to middle-term objective.”
The European Summit invited the Commission to include in its Annual Growth Survey for 2014 an assessment of results for the labour markets and products in terms of stimulating growth and jobs. (MB/transl.fl)