Luxembourg/Brussels, 16/10/2013 (Agence Europe) - Despite the reluctance of some member states, the European Commission is sticking to its July 2013 interpretation of the rules of the preventative arm of the Stability and Growth Pact that allow a degree of flexibility in interpreting public investment backed by EU funding.
The member states were divided on this question at the ECOFIN Council of Tuesday 15 October. Northern countries dislike the idea, whereas southern and eastern countries tend to support the idea of flexibility. Despite the lack of enthusiasm, in the light of the clear and unequivocal mandate from the European Summit, the Commission will be taking account in its assessment of member states' draft budgets for 2014 of the option for a country against which no excess deficit proceedings are running under the preventative arm of the Stability and Growth Pact to temporarily deviate under strict conditions from its medium-term structural deficit reduction programme. The deadline for submission of the draft budgets is Tuesday 15 October.
Olli Rehn listed the conditions for the “productive investment” clause, as put in writing to the member states in a letter he sent them in July (see EUROPE 10881). “Firstly, they apply to member states that had economic growth clearly well below its potential. Second, the 3% rule of fiscal deficit must not be breached and the public debt rule of the six pack legislation must be respected. And third, this needs to be focused on co-financed projects with European Structural and Cohesion Policy, Communication and the Connecting Europe Facility. These must have a positive, direct and verifiable long-term budgetary effect.”
“Italy has little but yet some room of manoeuvre within the limit of 3% of fiscal deficit which is essential in case a country wants to make use of this flexibility,” said Rehn. Italy's procedure for excess deficit came to an end in the spring of this year, but its deficit is still close to the 3% of GDP cut-off point and it therefore has to introduce measures to ensure it keeps its deficit within the limit set in the Stability and Growth Pact. (EL/transl.fl)