Brussels, 22/07/2014 (Agence Europe) - Italian Economy and Finance Minister Pier Carlo Padoan says that application of the stability and growth pact (SGP) must take account of the medium-term impact of structural reforms introduced in the member states.
Addressing the European Parliament's economic and monetary affairs committee on Tuesday 22 July on the priorities of the Italian Presidency of the Council of the EU for the next six months, Padoan said the time had come to think about the practicalities of the best strategy to boost growth and job creation again, which is what European citizens are calling for. He reiterated the European summit's official line that the SGP rules were not to be changed but rather the existing rules should be used in the best way and with a long-term view (see EUROPE 11110).
The minister went on to explain how the SGP can be interpreted, explaining that when assessing a member state's performance in terms of implemented reforms, one should remember that a country needs time. Not one year, but two or three before the benefits are seen and one can gauge whether a reform has been correctly designed and applied. Padoan stressed the importance of weighing up the short-term political costs in relation to the long-term growth and competitiveness benefits. Reforms also need to be adjusted to suit reality in the country in question because, in some member states, the civil service does not work properly, whereas in another country it is the legal system or in yet another country, Italy in particular, it is reform of labour that is extremely important. Padoan recommended the use of “incentives” for countries applying structural reforms in order to counteract the negative short-term impact of the reforms.
There are no longer any infringement proceedings outstanding against Italy for excess deficit, but slow growth is making it hard to meet the EU debt reduction requirement. According to Eurostat, Italy's debt stood at more than 135% of GDP in the first quarter of 2014. Padoan said that economic growth is the way out of huge debt and it is possible under SGP to take account of “exceptional circumstances” to justify deviation from the debt reduction trajectory.
The minister made his statements on the need to boost growth at a time when recovery is slower than forecast, even in growth engines like German. Padoan was also responding to the comments of interim Euro Commissioner Jyrki Katainen, who in an interview with Die Welt last Friday said Italy should introduce reforms before asking for greater flexibility.
The Italian minister wants all European levers that can stimulate growth to be put to use. He mentioned the mid-term review of the EUROPE 2020 strategy as an opportunity for better targeting priorities on completing the single market and investing in human resources, research and innovation. He said there should be a stronger connection between the instruments available and the objectives that are set, and investing for the longer term should be encouraged. He ignored questions about whether the €300 million investment plan mentioned at the EP by the future president of the European Commission, Jean-Claude Juncker, re-opened the debate on whether such investment should be taken into account when calculating countries' public deficit.
Taxation. In the fiscal domain, Padoan wants the Italian Presidency to be able to facilitate an eleven-country agreement to “gradually” introduce a financial transactions tax (see EUROPE 11086) and hopes that the draft legislation will be adopted before the end of the year in order to boost administrative cooperation in the fiscal domain to comply with the new global automatic exchange of information rules drawn up by the OECD (see EUROPE 11104). (MB)