Brussels, 08/07/2014 (Agence Europe) - The Italian prime minister, Matteo Renzi, said on Tuesday 8 July that investment in digital infrastructure should not be classified as expenditure under the stability and growth pact (SGP) rules.
At the Digital Venice forum, Renzi said that, leaving aside the ideological battle between austerity and flexibility, investment in digital infrastructure should not be included in the SGP rules.
His statement ruffled the Italian finance minister, Pier Carlo Padoan, who was chairing his first Ecofin Council in Brussels. Learning about his PM's statement from the media, Padoan said there was full agreement in the Italian government that growth should be backed within existing rules.
Interim Euro Commissioner Siim Kallas said that rules were rules and public expenditure must be included in the public deficit calculations irrespective of the type of investment involved: “There cannot be bad and good expenditure. All expenditures have to be included in the calculation of the deficit. Stability and growth pact equals strong framework, a pillar of confidence. These are the rules. There is no approach to start discussion on what kind of expenditure can be excluded. I can imagine what would happen if it was the case”. He was echoed by German Finance Minister Wolfgang Schäuble who said he wanted to quash “rumours” that there could be an alternative to structural reform and budget consolidation.
On Tuesday, Europe's finance ministers drafted a common statement on economic reform in the EU, which Padoan did not mention. The document focuses on the importance of member states carrying out structural reforms. An initial draft gave details of the option of ensuring better use of the SGP to back growth, but was too prescriptive in the eyes of Dutch Finance Minister Jeroen Dijsselbloem, who said ministers should not use more precise language that that used by the European summit.
All depends on how the SGP is interpreted because it will not be adjusted. Hence the importance of the new economic and monetary affairs commissioner. On Tuesday, the candidate appointed to become the new European Commission president, Jean-Claude Juncker, is reported to have told the S&D Group at the Parliament that the commissioner would be from the Social Democrat group (see related article).
Unveiling the priorities of the Italian Presidency of the EU Council of Ministers for the next six months, Padoan said the Italian growth strategy was three-pronged, focussing on economic integration, structural reform and mobilising cash for investment purposes. Pointing out that there is an immediate social and political cost to implementing reforms whereas the benefits in terms of growth are not seen until the medium-term, he said it was important for member states to have sufficient “incentives” to introduce reforms, but did not give any details.
The question of flexibility under the SGP is still on the negotiating table and talks will continue at the Ecofin Council in Milan in September. The official target is to include the debate in the assessment in December of implementation of the 2-pack and 6-pack of rules to tighten up the SGP, but unofficially the idea is to get a clearer idea of exactly what flexibility under the SGP might mean before countries hand their draft budgets to the European Commission in October. (MB)