Brussels, 26/09/2014 (Agence Europe) - Proposed as the new European Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici of France is preparing for his public hearing at the European Parliament's economic and monetary affairs committee on Thursday 2 October.
MEPs who are ardent proponents of budget orthodoxy are not concerned about the socialist Pierre Moscovici's skills or track record, but rather about his political viewpoint and his nationality. They have fears that he was put in the job by the next president of the European Commission, Jean-Claude Juncker, to demonstrate his independence from Germany. These MEPs feel that putting a socialist in the job runs against the dominant budget doctrine summarised in the three issues of budget consolidation, structural reforms and targeted investment. In addition, although France has had one of its own nationals in this particular job at the European Commission four times now, the country is hardly a shining example when it comes to respecting budget targets subscribed to at European level. After all, the second-largest economy in the eurozone has twice had its deficit reduction target postponed since the financial crisis broke out in 2008.
In June 2013, Moscovici himself, in his job of economy and finance minister in the Ayrault government at the time, got his colleagues at the ECOFIN Council to grant an extra two years (from 2013 to 2015) to bring the country's deficit down below the 3% of GDP mark in return for a commitment to introduce the promised structural reforms. France has certainly been actively reducing its public deficit over this period, from 5.2% of GDP in 2011 to 4.9% in 2012 and 4.3% in 2013 despite the absence of growth over this period (0% in 2012 and 0.2% in 2013).
If he sails through the hearing, Moscovici's first mission in early November will be the European Commission's view of the draft member state budgets that are to be submitted to it in the first fortnight of October. Ironically, he will be called upon to criticise the very policy that he once recommended himself, for the policy will not enable France to achieve its budget targets by 2017, as the Valls government recognised in mid-August. As a pledge of commitment to achieving the goals, Moscovici's successor, Michel Sapin, has been at pains to stand by the commitment to introduce structural reforms, such as reducing public spending by €50 billion by 2017, including a €21 billion cut in 2015.
Moscovici will therefore have to walk a public finance tightrope. On the one hand, he will want to demonstrate his credibility to lay the image promoted by German magazine Bild of “Mosco-Witz” to rest (“Witz” is the German word for “joke”), and has promised to deal severely with the “serious” French budget problem. He will demand that his former colleagues in the French government introduce the promised structural reforms. On the other hand, however, this French politician loyal to the French president, François Hollande, knows the EU's Stability and Growth Pact, and what is allowed under it in terms of flexibility, by heart. Under the roadmap given him by Juncker, he will have the job of ensuring both the “letter and the spirit” of the Stability and Growth Pact are respected, an SGP that the European Summit refuses to modify, and he will be required to prepare “guidelines on the best way of making use of this flexibility.”
The process of granting France further time will require recognition at EU level of an exceptional economic situation (lack-lustre growth and over-low inflation) and recognition of the French government's ability to introduce reforms. Although in 2013, France was one of six countries that were granted extra time (along with Spain, Poland, Slovenia, the Netherlands and Portugal), it might find itself isolated this time round because some of its partners have introduced more draconian measures to clean up their public finances.
Although he has little room for manoeuvre on budget questions, Moscovici has plenty of cards up his sleeve when it comes to the taxation side of the job (which he was reportedly only informed about a few minutes ahead of his appointment). His immediate response was delight to have been given such a big job on strategic issues for growth, which was formerly covered by two separate commissioners.
Juncker is a Luxembourger by nationality and therefore pays great attention to tax issues. He justified the decision to merge the two key portfolios by stating that it would allow better use to be made of fiscal policy to the benefit of economic governance. His circles reject the idea that the merger will lead to taxation getting lost in economic affairs, saying the opposite is true and the merger will give tax issues more prominence. The European Commission directorate-general for taxation and customs (DG TAXUD) is reported to have welcomed the move.
Some issues will require strong political commitment from Moscovici, such as the financial transactions tax (FTT). The French press points out that the commissioner-designate has flip-flopped on the question. When he was a minister, he said it was important to act fast and take strong measures, but later described the Commission's proposals as going too far.
Juncker has asked Moscovici to focus on the fight against tax fraud and tax evasion. Here, Moscovici can count on international momentum to put some “oomph” into the campaign because OECD countries have linked arms to achieve results in this field. The current Taxation Commissioner, Algirdas Semeta, calls on the EU to remain the flag-bearer in the fight against tax evasion. (MB and EL)