Brussels, 28/11/2014 (Agence Europe) - On Friday 28 November, the European Commission unveiled its assessment of the draft 2015 budgets of 16 countries of the eurozone (see EUROPE 11204).
The draft budgets of five member states (Germany, Ireland, Luxembourg, the Netherlands and Slovakia) appear to comply with the stability and growth pact and those of four others (Estonia, Latvia, Slovenia and Finland) presented plans which comply with European budgetary rules. Seven countries (Belgium, Spain, France, Italy, Malta, Austria and Portugal), on the other hand, are at risk of non-compliance with the provisions of the stability and growth pact.
The cases of Belgium, France and Italy will be the subject of particular monitoring as the Commission will examine their budgetary situation in early March 2015, in the light of the definitive versions of the budget laws to be adopted by these countries and the clarifications they make to their structural reform programmes, in line with recent commitments in terms of content and timetable, made in writing by the governments of the three countries.
“We didn't want to make decisions too early which could have been called into question” once we have the budgetary figures, said Commissioner for Economic Affairs Pierre Moscovici, who takes the view that “it is always better to have constant dialogue than to allow the goalposts to be moved”. This extra time, which is due mainly to the fact that the Juncker Commission took up office in early November, should be used to make “extra efforts”, he warned. He has not ruled out the possibility of recommending sanctions against the three countries, if they do not take sufficient action to comply with their budgetary commitments: “All procedures and options (will remain) on the table”. Commissioner for the Euro Valdis Dombrovskis drew a distinction between the three member states: France is the most exposed, because it has been the subject of an excessive deficit procedure, a situation which has not affected either Belgium or Italy, which are excessively indebted.
France. “By the looks of it, the timetable will not be respected” commented Moscovici regarding the trajectory of the French deficit, which was supposed to come back under the bar of 3% of GDP in 2015. The French government has unilaterally pushed this back to 2017. An official decision at European level on this issue will have to wait until spring 2015. Between now and then, the Commission is waiting to see the scale of the structural measures (liberalisation of the regulated professions, opening shops on Sundays, etc) contained in the law to be presented in December by French Economy Minister Emmanuel Macron. At this stage, however, it takes the view that the structural effort (not including the effects of the economic situation) anticipated for 2015 will be enough (0.3% compared to the threshold of 0.8% recommended by the Council). As for compliance with the commitments taken for 2014, “the information available at this stage shows that France has not acted effectively enough”, it states.
Italy. Whilst the Italian deficit will come tantalisingly close to the benchmark of 3% of GDP in 2014, Moscovici has called on the Italian authorities to make “a little bit more effort” to ensure that the 2015 finance law of Italy complies with the pact. Against the backdrop of the budgetary commitments made for 2014, the Commission stresses the importance of pursuing policies in favour of growth, keeping public expenditure under control, improving the efficiency of public expenditure and concluding the scheduled privatisations, in order to tie Italian debt into a downward trajectory (132.2% of GDP in 2014).
Belgium. Putting Belgium in the same category as France and Italy is not “collateral damage”, explained Moscovici, who added that Belgium “needs to consolidate its reforms”. He referred to Belgian efforts which are already “largely in line” with requirements, although various uncertainties prompted the Commission to put Belgium under the same regime as France and Italy. These uncertainties have to do with public debt, which will be around 105% of GDP in 2014 and will rise higher, to reach 107.3% in 2015. Additionally, the deficit has grown worse this year. The Commission therefore calls upon Belgium to take the necessary measures to ensure that the 2015 budget complies with the pact. The Belgian authorities have undertaken to cut employment tax whilst increasing indirect taxation, to bring the pension system more into line with increased life expectancy, and to reduce the administrative burden on business.
Portugal. As it is under an excessive deficit procedure, Portugal is running the risk that its draft budget for 2015 will not be in line with the pact. According to the Commission, the Portuguese public deficit will not come back below the 3% of GDP level in 2015 (3.3% instead of the 2.7% according to Lisbon's calculations). “The budgetary effort is falling clearly below the recommendation (of the Council) and this indicates that additional and substantial structural cleansing measures are necessary for 2015”, it states, calling on the Portuguese authorities to speed up the setting in place of the structural measures listed in the Council's recommendation for 2014, as “limited progress” has been observed in this area. (MB and EL)