Brussels, 25/11/2013 (Agence Europe) - For the first time, the Eurogroup meeting last week discussed member states' draft budgets for 2014, focussing on countries that run the risk of breaking the stability and growth pact (SGP) rules.
“Europe's challenges are structural so we have to address them in a structural way,' explained the head of the Eurogroup, Jeroen Dijsselbloem, on Friday 22 November, stressing the importance of focussing more on quality and content of budget adjustment, rather than productive growth-oriented investment in things like innovation, R&D and education. “Overall, there is a need to step up structural reform to boost sustainable growth and job creation”, said Euro Commissioner Olli Rehn.
The eurozone finance minsters' discussions concentrated on five countries, Spain, Italy, Luxembourg, Malta and Finland, whose draft budgets run the risk of breaching the stability and growth pact. They also examined three countries, France, the Netherlands and Slovenia, which the Commission says have no room for manoeuvre (see EUROPE 10964). “We fully respect what the European Commission said on draft budgetary plans. No change on the verdict”, said Dijsselbloem, noting that countries that risk being out of step with the SGP are asked to take further consolidation measures. He added that their finance ministers had pledged full commitment to dealing with the risks that have been identified.
Italy has announced new measures, for example, as part of a public spending review, in order to cut its excess public debt. Rehn said this should lead to permanent action early next year of the equivalent of 0.4% of structural GDP, so that it can be taken into account in the Commission's next economic analysis, in February, and enable Italy to benefit from the investment clause, for which countries have to have a public deficit of below 3% of GDP. Spain is planning a second reform of the labour market, explained the commissioner, adding that the structural adjustment in the country would be of the order of 0.25% of GDP. He said that Finland was a cause of concern because the public debt is about to exceed the 60% of GDP threshold for the first time. Luxembourg, like Germany, will unveil its draft budget for next year once the new government has been formed.
In a statement, the Eurogroup urged France, Malta and the Netherlands to rigorously apply their budget plans and prevent the emergence of slippages that would jeopardise respect of the SGP. Rehn hoped that France would speed up its economic reforms.
Belgium and Austria appear able to sustainably correct their excess deficits and therefore exit the infringement proceedings. The commissioner said, however, that there is no certainty at this stage that Slovakia would be able to sustainably correct its deficit.
Dijsselbloem and Rehn welcomed the way the new budget process has boosted the credibility of economic governance to boost budget surveillance at EU level. “My colleagues demonstrated constructive stands. We are not afraid to confront and question each other” said the Dutch finance minister. Rehn added: “We have seen much less tendency than in the past for over-optimistic projections, which was a major wise and bad habit in member states. This is an important improvement of credibility (fiscal councils). The pace of consolidation is set to slow down further, so that the average change in the structural balance next year will be of one quarter of a percentage point of GDP,' compared with 1.5% of GDP in 2012. (MB/transl.fl)