Brussels, 13/01/2015 (Agence Europe) - On Tuesday 13 January, the European Commission presented guidelines on how it will interpret the Stability and Growth Pact to stimulate structural reforms and facilitate investments in the member states.
“We are not changing or replacing the rules” of the Stability Pact, which remains “instrumental in restoring confidence” and must continue to be “credible and predictable”, said the Commissioner for the Euro, Valdis Dombrovskis. He said that the Commission's aim was to provide “detailed guidelines” on how to make use of the “flexibility” built into the Pact, and which makes economic sense given that recovery is still “fragile”. He added that the countries not under excessive deficit procedures will benefit the most from this flexibility.
The Commissioner for Economic and Financial Affairs, Pierre Moscovici, said that the communication had not been designed to “tackle the situation of any given country in the short term”, as individual member states can be concerned by one or more areas of the new orientations.
There are three aims to the Commission's communication: - encouraging an effective implementation of the structural reforms; - promoting investment, particularly in the framework of the 'Juncker' investment plan (see other article); - taking better account of the cycle by means of a new matrix, to ensure that budgetary efforts are increased in times of growth and slackened off during recession.
Whether a member state is in the preventative or corrective plank of the Pact, the Commission will take account of the positive impact of the structural reforms. For countries not under an excessive deficit procedure (deficit below 3% of GDP), a 'structural reforms' clause will assess the impact of reforms, as long as these are effectively applied and have positive budgetary effects verifiable over the longer term. “This clause has so far been implemented only to take account of pension reform”, Dombrovskis noted. Any medium-term deviation from the budgetary objective must not exceed 0.5% of GDP or lead to a deficit of more than 3% of GDP. For countries under an excessive deficit procedure, the Commission may recommend a longer period to come back below 3% of GDP, as long as the State in question submits a specific reform plan.
Neutrality of budgetary contributions to EFSI. In order to encourage direct contributions of the member states to the European Fund for Strategic Investments (EFSI) (see other article), the Commission will not take account of this expenditure in its assessment of compliance with the budgetary objectives. “Basically, if the value of 3% is exceeded, the Commission will not launch excessive deficit proceedings, as long as this discrepancy is limited and temporary”, Moscovici pledged. The same will apply to the treatment of these contributions with regard to compliance with the rules on public debt.
At the European Parliament on Tuesday, the President of the European Commission, Jean-Claude Juncker, renewed his calls for the member states to make a direct contribution to the EFSI. Shortly afterwards, the Italian Prime Minister, Matteo Renzi, promised that his country would be “generous” in this matter.
Investment clause clarified. The Commission's communication formalises the investment clause contained in the Pact and which Italy unsuccessfully attempted to benefit from (see EUROPE 11120 and 10881). It lists the following conditions that member states must comply with in order to be authorised to deviate from their budgetary trajectory in the medium term in order to support investment: - the country's economy must be in recession or well below its potential; - the authorised deviation must not lead to a public deficit of more than 3% of GDP; - the level of investment must be considerably improved; - eligible investments constitute national co-funding of projects supported by the structural funds and the cohesion policy (including the 'Youth Employment' initiative, the trans-European networks, the Connecting Europe Facility and national co-funding of projects paid for by the EFSI); - the deviation from the budgetary objective in the medium term must be offset within the period laid down by the national stability and convergence programmes. (MB)