Brussels, 08/12/2014 (Agence Europe) - The finance ministers of the eurozone broadly share the European Commission's analysis of the draft budgets for 2015 of the 16 countries in the eurozone.
On Monday 8 December, Eurogroup said that according to the 16 eurozone nations' budget plans submitted to the European Commission (all eurozone nations bar Greece and Cyprus, see EUROPE 11212), the aggregate eurozone deficit will be 2.6% and 2.4% of GDP in 2014 and 2015, while the aggregate debt levels are stabilising and will begin to fall. Eurogroup states: “The Commission's forecast indicates a broadly neutral planned fiscal stance for the euro area as a whole in 2015. In line with the Commission's assessment, this reflects a balance between sustainability requirements and current weak cyclical conditions. At the same time, the Commission assessment of the individual budgetary plans shows an uneven distribution, with several Member States at risk of not meeting their current obligations under the Stability and Growth Pact (SGP), and others outperforming their MTO” (medium-term objectives).
Eurogroup is pleased that no country's budget plans were rejected outright by the European Commission and it endorses the European Commission's division of eurozone nations (bar Cyprus and Greece) into three categories: - five countries' budget plans for 2015 (Germany, Ireland, Luxembourg, the Netherlands and Slovakia) seem to comply with the SGP; - four countries' budget plans (Estonia, Latvia, Slovenia and Finland) comply with the EU's budget rules; - but seven countries (Belgium, Spain, France, Italy, Malta, Austria and Portugal) run the risk of failing to comply with the Stability and Growth Pact.
Economic Affairs Commissioner Pierre Moscovici said that irrespective of which category a country was placed in, there are no countries that could not improve on their macroeconomic or budget situation. Pierre Moscovici said structural reforms, structural budget efforts and investment were the “key” to economic recovery. The head of Eurogroup, Jeroen Dijsselbloem, said that eurozone nations had to pursue budget consolidation in a differentiated and growth-friendly manner, along with structural reforms, in order to deal with the challenges of unemployment, particularly youth unemployment, and the ageing population.
Of the seven countries whose budget plans for 2015 risk failing to comply with the Stability and Growth Pact rules, France, Belgium and Italy are being examined with a fine toothcomb and the results of this assessment will be published in early March. Moscovici stressed that this breathing space was time for action, not reflection. He wants the three countries to provide details of non-cyclical structural budget measures and structural reforms they are planning to adopt in the meantime.
France. Paris is subject to excess deficit proceedings. Eurogroup states: “We note that according to the latest Commission assessment, France's structural fiscal effort in 2015 will be 0.3% of GDP, whereas 0.8% of GDP is required under the excessive deficit procedure. On this basis, additional measures would be needed to allow for an improvement of the structural effort in order to comply with the rules of the SGP.” It welcomes France's commitments to implement measures to ensure the budget will be in line with the required fiscal effort for 2015 and to address the “structural weaknesses” of the economy. On Wednesday 10 December, the French government will unveil a draft law to make it easier for businesses to open on Sunday and to breathe more competition into regulated professions such as notaries. On Sunday 7 December, the Germany chancellor, Angela Merkel, said the measures set out in the current French budget plans did not go far enough.
Italy. The ministers continue to be concerned about the high level of public debt in Italy, but acknowledge that it is difficult to cut debt with low growth and very low inflation. “We note that according to the latest Commission assessment, Italy's structural fiscal effort in 2015 will be 0.1% of GDP, whereas 0.5% of GDP is required under the preventive arm.(…) We welcome the commitments of Italy to implement the measures necessary to ensure that the 2015 budget will be compliant with the rules of the preventive arm of SGP” along the commitment to use windfall revenues, privatisation income or unforeseen expenditure savings to bring down the debt.
Belgium. Eurogroup's assessment of Belgium's debt is much the same as its assessment of the Italian debt. The ministers add that the Commission says Belgium's structural fiscal effort in 2015 will be 0.4% of GDP, whereas 0.6% of GDP is required under the preventive arm of the SGP and “on this basis, effective measures would be needed to allow for an improvement of the structural effort in order to comply with the rules of the SGP.” They welcome “the commitments of Belgium to implement the measures necessary to ensure that the 2015 budget will be compliant with the rules of the preventive arm of SGP. We also welcome the commitment to use windfall revenues or unforeseen expenditure savings in 2015 and step up privatisation efforts to bring the debt ratio on a declining path. Finally, we welcome the commitments of Belgium to address the structural weaknesses of the economy and encourage the implementation of the ambitious and wide-ranging reform agenda.” (MB and EL)