Milan, 09/10/2014 (Agence Europe) - Structural reforms to be adopted at European and national levels as a means to get back on track towards growth was one of the areas of work at the special European summit on tackling youth unemployment held in Milan on Wednesday 8 October.
At the end of the discussions, the president of the European Commission, José-Manuel Barroso stated, “we have not yet won the battle for growth. The reality is that growth in Europe is weak and uneven. And if there is one thing in common to those that are better today it is that they were pushing for structural reforms with more determination”.
Officially, no one is disputing the determination of states that are considered to be lagging behind, of reforming their economies and respecting European level rules. Hosting the conference, Matteo Renzi, the Italian prime minister, received strong support from his partners for the labour market reform his government is attempting, not without difficulties, to get adopted. Angela Merkel, the German chancellor, stated, “reforms have been made, look at the 'Jobs Act' in Italy… I have no reason to doubt that France will respect its commitments and Italy will do the same”.
Renzi said that, “whoever wants to change the world must firstly change themselves”. He is convinced that his country will be “credible” when it has accomplished the task allocated it. He strongly criticised attempts made at the Senate by his political adversaries of obstruction. On Wednesday, the Senate approved the labour market reform and Renzi provided assurances that his country, as indicated in the budgetary law he will be sending to the Commission in the middle of this month, would continue to be below the 3% public deficit ceiling compared to national GDP in 2015.
Confronting a “problem growth… that is too weak to allow for a significant reduction in unemployment”, French President François Hollande said that there were two lessons to be learnt, “each country had to make an effort to relocate its level of competitiveness”. He also said that they needed to create a growth friendly environment in Europe. He explained that in France, they were taking action to reduce labour costs, modernise the labour market, reform education and stimulate innovation. He also provided assurances that France would, “respect all its budgetary commitments… by using all available flexibility” allowed in the Stability Pact. France, however, presented a budget for 2015 that is forecasting a postponement of the French deficit returning to below the 3% ceiling compared to GDP to until 2015-2017.
Once this determination to push forward reforms at the national level was made, the two Social Democrat leaders appealed for a reorientation of policies in Europe. Hollande warned that, “if Europe is not able to provide hope, the people will turn against it”. According to the young Italian Prime Minister, the current economic situation is compelling Europeans to, “rethink economic development models” that exist. In this context, he referred to the, “contradiction” between the desire to take action to stimulate the economy and a straitjacket imposed by European budgetary rules. He said that if they settled the €3 billion represented by delayed public government payments to economic operators or if they consumed all European structural funds and provided their respective part of national co-financing, they would not respect the 3% ceiling of GDP in the public deficit as included in the Stability Pact. In such a scenario, Italy would be exposed to another excessive deficit procedure.
Germany has been called to do more to relaunch economic activity. Hollande said that he considered that, “there are countries that can boost domestic demand” while France is carrying out structural reforms. Merkel pointed out that, “Germany is taking measures to stimulate demand”: a minimum wage will be in place from January 2015 and an investment plan in the education sector will be applied. These two measures will cost €9 billion and €6 billion respectively. She highlighted the importance of remaining loyal to the Stability and Growth Pact but the Chancellor also acknowledged that European budgetary rules allowed for flexibility but she did not say how this could be applied.
The question of respect for budgetary rules in a worrying economic context will be at the heart of EU and Eurozone summits at the end of October. The future 'Juncker' Commission is due to prepare an assessment of the rules for advising the Stability Pact by December (“2 pack” and “6 pack”). (MB)