Brussels, 27/06/2014 (Agence Europe) - On Friday 27 June, the European summit said that policies to boost economic growth must be on an equal footing with policies to ensure budget stability, thus closing the door to any review of the stability and growth pact.
In a strategic agenda for the EU, the EU28 leaders say they respect the stability and growth pact (SGP) and all EU economies must continue structural reforms. The EU's common strength very clearly depends on the success of each and every one, which is why the EU must make real progress in favouring growth, boosting investment, creating more and better jobs and encouraging competitiveness-friendly reforms. This will also require making the best use of the flexibility written into the current SGP.
One of the leaders in this battle, Italian Prime Minister Matteo Renzi, said the language used marked a veritable “turning point for Europe”. He added that, if a country is seriously introducing structural reforms, then it is entitled to flexibility under the SGP, feeling that a sole focus on budget consolidation is a violation of the EU's budget rules. Italy's Socialist prime minister says this also applies in Italy to the “1000 days” reform project that will begin in September 2014. The French president, Francois Hollande, agreed, saying that everything must be done to ensure commitments are respected, but the room for manoeuvre available under the SGP can also be used. He said that “structural efforts” to become more competitive must boost growth.
The Commission as arbitor. Use of the SGP will be subject to interpretation by the European Commission. The German chancellor, Angela Merkel, said the Commission was the arbiter on use of flexibility under the SGP. Merkel does not oppose the idea of flexibility under the rules as long as the rules remain in place. For Italy, whose deficit is below 3% of GDP, the Commission might say that some Italian co-financing for the carrying out of projects would not be included in budget calculations made at EU level, she added. Belgian Prime Minister Elio Di Rupo said application of flexibility under the stability and growth pact would emerge after discussion between the member state and the Commission.
The president of the European Commission, José Manuel Barroso, said no head of government had proposed to change the rules. He said there had been “discussion on how can we make the most of the current rules, so that we can pursue fiscal consolidation and at same time make the most for invest and growth”. Likewise, Luxembourg Prime Minister Xavier Bettel said that the most important thing was that the budget rules were not going to change. A newcomer at the European summit, Finland's new Liberal Prime Minister Alexander Stubb rejected the idea of any extra flexibility under the SGP: “We should not create the illusion that state actors or politicians can create growth. Growth is created by entrepreneurs and workers”. He said the SGP should be based on stability first, but also growth: “We can do three things with growth: structural reforms at home, liberalisation of the internal market, free trade”. (MB with AN/EH/MD/EL/IL/CG)