Brussels, 14/05/2013 (Agence Europe) - On Monday 13 May, the seventeen eurozone finance ministers took note of the European Commission's gloomy economic forecast of the eurozone economy shrinking by 0.4% in 2013 (see EUROPE 10840).
“We took note of the European Commission economic forecasts. We are not out of the woods yet but the decisive policy action undertaken is gradually paving the way for a return of sustainable growth and jobs. We'll continue implementing growth-friendly and differentiated consolidation strategies and respect our budgetary objectives in line with the Stability and Growth Pact which includes an element of flexibility,” said the head of Eurogroup, Jeroen Dijsselbloem.
The recession is lasting longer than expected and the European Commission suggests that five countries should be given more time to bring their deficits back below the 3% of GDP cut-off point, as long, that is, as they respect their budget objectives in structural terms (in other words not including the cost of dealing with the impact of the recession) and use the time to introduce reforms, some of which will necessarily be tough.
It is suggested that France and Spain should be given two extra years (until 2015) and the Netherlands, Portugal and Slovenia one extra year. Quoting the German experience of 2003, the Commission says it understands that it is not possible to carry out structural reforms and correct public finances at the same time during an even worse economic period, explained a diplomat, noting that the nominal rule (in the Stability and Growth Pact) is more important these days than the structural rule.
The new Italian economy minister, Fabrizio Saccomanni, has unveiled the Letta government's economic programme, stressing that Italy wants to stick with its commitments at EU level. Eurogroup wants Italy to keep its deficit below 3% of GDP in 2013 and speed up the introduction of reforms (see EUROPE 10839).
On Wednesday 29 May, the European Commission will unveil its country-specific recommendations based on national stability and reform programmes submitted to it. At the June ECOFIN Council, formal decisions will be taken, when new criteria may potentially be added.
Macroeconomic imbalances. Eurogroup discussed the macroeconomic imbalances observed in Spain and Slovenia. Without going into detail, Euro Commissioner Olli Rehn welcomed “balance” in Spanish budget consolidation between the impact of the recession and structural reforms.
Eurogroup's comments were not so reassuring when it came to Slovenia. “Slovenia has to take swift and decisive action. First and foremost Slovenia has to restore trust in the resilience of its banking sector,” said Dijsselbloem. Olli Rehn said: “It is too early to say whether it provides strong credible responses to the major challenges Slovenia faces. Even if the situation is manageable, there is absolutely no time to waste to take decisive action and to address macro imbalances.” Any decision to launch proceedings for excessive macroeconomic imbalances, which could lead to the country being fined, will not be taken before the June 2013 ECOFIN Council meeting. (MB/transl.fl)