Brussels, 20/02/2013 (Agence Europe) - The European Commission's pledge to rapidly set up a group of experts to examine the question of partial pooling of eurozone debt made it possible on Wednesday 20 February for the inter-institutional talks on the '”two-pack” of legislation adjusting the Stability and Growth Pact to be reached (see EUROPE 10789). The new rules will need to be endorsed by the European Parliament at its plenary in March.
Irish economy minister Michael Noonan said he welcomed the agreement on the two-pack as a key component of the eurozone's economic architecture.
The two regulations comprising the adjustments to the SGP aim to introduce into EU rules legislation from the intergovernmental Budget Pact introducing greater budget surveillance in eurozone nations, particularly those in receipt of financial aid. For example, the eurozone countries must submit each October their budget plans for the following year to give the European Commission enough time to call for adjustments if it feels the country might not be able to meet its budget commitments.
The basic idea is that sustainable public finances depends on how budgets are designed, and France's failure to meet its deficit criteria because of its ever over-optimistic budget figures is a stark example of this, explained Sylvie Goulard (ALDE, France). “With such rules in place three years ago we would have avoided the problems currently experienced by some countries and which have threatened the whole Eurozone since it would have been possible to take early, clear and quick actions”, said Jean-Paul Gauzès (EPP, France), one of the two European Parliament rapporteurs.
Without challenging the new surveillance powers granted to the European Commission, the European Parliament adjusted the draft legislation to ensure greater democratic scrutiny over the work of the Commission and the troika of lenders (the European Commission, the European Central Bank and the International Monetary Fund) which does the negotiating for the eurozone of the content and details of austerity measures which countries in receipt of financial aid are required to introduce. Budget correction measures taken by the member states must not act as a handicap on investment with high growth potential or make damaging cuts in education or healthcare. The Commission will be required to carry out an assessment of how one country's budget will affect its neighbours. Philippe Lamberts (Greens/EFA, Belgium) said the deal provides a qualitative approach to public finance that is based more on the EUROPE 2020 employment, poverty, education, innovation, energy and climate targets.
Group of experts. The S&D, ALDE and Greens/EFA parties vetoed agreement on the two-pack for a long time with their demand for progress on budget solidarity to balance out the budget consolidation being demanded of eurozone countries. The other Parliament rapporteur, Elisa Ferreira (S&D, Portugal) said that now that there are short-term budget rules to prevent debt being racked up, long-term reflection is needed on the management of existing debt, and the Commission must be at the heart of this reflection.
Despite its reluctance, the Commission has agreed to establish a group of experts to carry out by March 2014 a detailed analysis of the possible pros and cons, requirements and obstacles to partial substitution of national debt by a redemption fund and common emissions of eurobills. Any debt pooling would have to go hand-in-hand with greater budget integration and discipline and have democratic legitimacy, warns the Commission, not making any formal commitment to issue draft legislation before the end of its term of office.
Exactly who will be on the group of experts is a key question. Euro Commissioner Olli Rehn said that the experts could come from academia and the private sector as long as they have solid experience in public finance.
MEPs favouring partial pooling of eurozone debt hope that the group will be of the same calibre as the Larosiere Group on financial supervision or the Liikanen Group on banking, and that it will make ambitious recommendations. Off the record, one MEP said that it was just window-dressing and would not come to much. The choice of March 2014 is significant, marking the end of the term of the current European Parliament. Some MEPs hope that European economic governance in general and debt pooling in particular will be a campaign track issue for the European elections, while others say that the deadline is a signal that the debate will come to an end when the new Parliament and Commission take up office.
Along with the pledge to set up a group of experts, the Commission renewed its commitment to continue working on the following: - exploring ways by the summer of 2013 to exempt certain public investment from the Stability and Growth Pact deficit figures; after adoption of the 2014-2020 Financial Framework and before the end of the year, to unveil measures to ensure better co-ordination of national economic policies in the pipeline and setting up a fund to help eurozone nations apply structural reforms; monitoring the EU employment package and action plan to tackle tax evasion; unveiling draft measures later this year to give the eurozone observer status at the IMF as a precondition for the EU having its own seat on international bodies like the IMF; and unveiling ideas before the next European elections on how the EU treaties could be changed to enhance economic and monetary union. (MB/transl.fl)