Brussels, 29/05/2013 (Agence Europe) - Slow and steady wins the race. Relaxing the pressure in terms of the speed at which countries clean up public finance, the European Commission urged member states in its social and economic country-specific recommendations published on Wednesday 29 May to introduce structural reforms that will enable a rapid return to growth. The recommendations will now go to the European Summit in June for rubber-stamping and possible amendment.
In order to deal with the current crisis, European consensus is needed if the remedy is to be exhaustive and it needs to be made-to-measure for each country, whether it be in deficit or surplus, said the president of the European Commission, José Manuel Barroso. He listed key elements in the recommendations - tackling bank fragmentation by returning to the normal process of lending to the private sector; completing the single market; reforming the labour markets of 19 member states; and dealing immediately with the risk of poverty which has become a social emergency, by training young people for jobs in the future in the green economy and the digital world.
“We must do whatever it takes to overcome the unemployment crisis,” said Euro Commissioner Olli Rehn, mentioning the need for continuing with budget consolidation in structural terms, in other words not including the impact of the recession. He said that, in terms of tax, the Commission has given a good mark to countries whose policies aim to encourage growth. Tax Commissioner Algirdas Semeta said things were moving the right direction. Nine countries, however, have been asked to expand and diversify their tax basis, and twelve to reform tax governance to better clamp down on tax evasion and fraud.
Excessive deficit procedure. In terms of the budget, the Commission suggests that the June 2013 Ecofin Council should launch excessive deficit proceedings against Malta, whose deficit is expected to rise to 3.7% in 2013 and 3.6% in 2014. Five countries, Italy, Latvia, Lithuania, Hungary and Romania, may see the proceedings against them dropped. The Commission recommends that more time be given to six other member states for them to achieve their budget targets, as long that is, as the countries introduce structural reforms and continue to clean up the public purse in structural terms. Two extra years would be granted to Spain (new deadline 2016), France (2015), Poland (2014) and Slovenia (2015) and on extra year to the Netherlands (2014) and Portugal (2015). Spain, France, the Netherlands and Slovenia have been given until 1 October this year to publish measures they are planning to introduce to correct their excessive deficits.
Praising the continued budget efforts of Italy, Rehn said that the country has little room for manoeuvre because of the decision to pay off the public sector's outstanding invoices and the country's high public debt, which could exceed 130% of GDP in 2014. A precondition for ending the excessive deficit proceedings against Italy is that the country must provide guarantees this year that the deficit will remain below 3%. Barroso said Italy was like France when it comes to loss of competitiveness.
The extra time granted to France is not special treatment, said Barroso, because it comes along with the requirement that reforms must continue. He urged the French government to deal with the country's loss of competitiveness, that has been afflicting France for the past two decades. Ideas put forward to this end are to cut public spending, reduce labour costs by cutting social security contributions, making it easier for small business to expand overseas and making the broadband and regulated professions more competitive. Rehn asked France to unveil pensions reform later this year with a view to achieving cost equilibrium 2021. He also mentioned the high concentration of the French energy market.
Spain will be getting two more years to correct its excessive deficit. Commissioner Rehn welcomed the country's reform programme and said it was important for Spain to continue consolidating public finances. Spain will shortly be finalising its assessment of the Spanish labour market and making any changes that prove necessary to tackle young unemployment. It is recommended that Spain ensures that the pension age rises in line with life expectancy. An assessment of the country's tax system is required by March 2014.
In April, the Commission put the spotlight on Spain for macroeconomic imbalances and remains in close contact over how to deal with this. Commissioner Rehn said he didn't see any indication of a need for increased ESM capital in the Spanish banking industry and encourages Madrid to apply a bank recapitalisation programme.
The Netherlands is currently in recession and has been given until 2014 to reduce its public deficit to 2.8% of GDP. Rehn asked for new consolidation measures to be unveiled later this year.
Belgium has narrowly avoided financial penalties for failing to meet its excessive deficit targets in 2012 despite the fact that the country has taken sufficient measures to meet its targets, explained Rehn. Levying a retroactive fine would, he said, have been neither fair nor legally valid because the current government has kept the consolidation momentum up after three years of failing to respect the budget targets. The European Commission has given Belgium a year's breathing space to bring its deficit down to 2.7% and achieve a structural balance of 1%. Brussels has until 21 September to submit details of the measures it has taken to meet the targets. The Commission will monitor progress through the quarterly reports to be submitted by the Belgian government. Belgium has been asked to unveil structural measures for 2014 to ensure a sustainable correction of the excessive deficit.
Slovenia, like Spain, will not have any excessive macroeconomic imbalances proceedings launched against it because of what Rehn says is its “decisive” manner of tackling the problems. He says that the programme of reforms submitted by Slovenia should lead to sustainable correction of the imbalances. It is asked to correct is excessive deficit by 2015 through sufficiently detailed structural measures. Slovenia is asked to introduce a tax collection drive and to energetically reform pensions and the labour market. The country is asked to ensure that pay rises encourage competitiveness and job creation and to relax the rules on student work.
On the struggling Slovenian bank system, the Commission recommends that an independent foreign adviser be appointed by June 2013 to assess the quality of bank assets, a study that should be completed by the end of the year. Slovenia should be prepared to inject extra capital if further problems arise, says the Commission. It is asked to facilitate the privatisation process by removing administrative obstacles. Slovenia is also asked to make it easier for the private sector to take over highly indebted but economically viable private companies and to encourage foreign direct investment. (MB, EL/transl.fl)