Luxembourg, 19/06/2014 (Agence Europe) - Several EU18 finance ministers stifled any possibility of easing the stability and growth pact (SGP) rules in order to boost economic growth upon their arrival at the Eurogroup meeting on Thursday 19 June.
German Finance Minister Wolfgang Schäuble said there was no need to change the SGP because it was already sufficiently flexible to enable member states to stimulate economic growth. He said that international experts were in agreement that a combination of budget consolidation and structural reforms were the precondition for growth. Echoing the Christian Democrat German chancellor, Schäuble contradicted the comments by Social Democrats in the coalition government who recently called for an easing of the SGP rules (see EUROPE 11103 and 11102).
Euro Commissioner Olli Rehn, for whom it was the last Council meeting before he becomes an MEP, did not disagree with Schäuble, saying it was important to respect the rules that already contained a high degree of “smart” flexibility. He said that the recent revision of the SGP (through the introduction of the “6-pack'”and '”2-pack”) meant that the eurozone now set medium-term deficit reduction targets in structural terms that take account of the economic situation rather than simply setting targets in nominal terms.
Rehn said the reason for the economic situation in the EU28 stabilising is threefold - member states have made great efforts to consolidate their budgets, reducing average public deficits from 7% to 2.5% in 2013; the European Central Bank has taken decisive measures by injecting cash into the system and launching the OMT scheme for the purchase of sovereign debt; and economic governance has been strengthened with the focus on structural reforms.
Even ministers from struggling countries that are finding it difficult to meet their budget targets and who therefore could be tempted to view a relaxing of budget rules as a good thing, kept a low profile. Italian Finance Minister Pier Carlo Padoan, whose country will be taking over from Greece at the helm of the Council of the EU on 1 July, said that Italy was not demanding a reform of the SGP and had not requested it. He said that what Italy had requested was to negotiate all the instruments available in Europe for accelerating growth and job creation. He said Europe must clearly re-orient its policies towards growth and job creation after a period of focussing on budget consolidation and establishing banking union.
It was suggested that the Italian prime minister, Matteo Renzi would make his support for the EPP candidate from Luxembourg, Jean-Claude Juncker, to become the next head of the European Commission conditional upon receiving guarantees about growth-stimulus measures from Europe. Italy has now exited the excess deficit procedure and is not seeking extra time to meet its budget commitments. Its problem is more the size of its debt - a whopping €2 trillion plus - and very weak growth. At one time, Rome called for more favourable treatment of public investment in future growth backed by cash from the structural funds. It argued that the SGP was being interpreted too literally, but finally abandoned its demand.
France is struggling to reduce its deficit to below the 3% of GDP cut-off point in 2015 and stresses the scale of work required to this end. French Finance Minister Michel Sapin said that rules were rules and the right speed had to be found for each country, particularly those having the greatest difficulty returning to a good budget situation and an orderly reduction in debt that is done in a way that is compatible with a return to growth.
Without denying the problems facing his country, Sapin said that the European Commission's social and economic recommendations for his country took account of the decisions taken by the French government about a national competitiveness and responsibility pact. Sapin said that this showed that the message was getting through and people were no longer raising their eyebrows at France. (MB)