Brussels, 20/09/2013 (Agence Europe) - Despite a preliminary agreement being reached on Tuesday at technical level on changing the calculation method for structural deficits, which could enable some countries to relax their austerity drives, the European Commission said on Friday 20 September that nothing had yet been decided and the question will go to the EU28 next week.
The Commission suggested the changes to see whether there was a way of optimising calculation methods for potential growth in GDP, which are used in turn for calculating deficits, explained Simon O'Connor, a spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn. This is a purely technical question and will be discussed next week by the economic policy committee of the Council of the EU or, possibly, by the ECOFIN Council, explained O'Connor, refusing to comment on any potential positive impact this might have in specific countries because a formal decision has not yet been taken. The Wall Street Journal says the changes are in the process of being agreed upon.
On Friday, a French diplomatic source said that the way structural deficits are calculated is an old debate, and on several occasions, Paris has challenged the Commission's calculation methods. They are based on the difference between growth potential if the economic cycle is flat and actual growth. This output gap is used to calculate the structural deficit, which is in turn used by the Commission in its economic recommendations. France argues that the Commission underestimates the growth potential and this means an underestimation of the output gap and the effects of the crisis.
For political reasons, France abandoned attempts to get the calculations changed a couple of years ago, feeling it was pointless to continue because nothing looked likely to change. The source said it seemed that other countries have been putting pressure on the Commission, but didn't say which. The Wall Street Journal says Spain brought up the question again, because it is first in line to benefit positively from such a change in the calculation methods due to the structure of its labour market. The Spanish finance minister warned on Thursday that did not mean that Spain would reduce its budget consolidation efforts. To a lesser extent, Greece, Ireland and Portugal could also benefit from the adjustment. (EL/transl.fl)