Brussels, 27/01/2015 (Agence Europe) - The European Commission will apply its interpretation of the flexibility laid down in the Stability Pact to rule, in March, on the draft 2015 budgets of three countries - Belgium, France and Italy - which have been granted extra time.
The recent communication on the flexibility of the Pact is therefore of “immediate application, and will also apply to the situations on which we are to return our opinions in a few weeks' time”, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, said after the Eurogroup meeting of Monday 26 January. Amongst other things, this communication encourages an effective implementation of structural reforms, taking account of their positive impacts on the national budgets (see EUROPE 11229). In order to be able to benefit from this 'structural reforms' clause, the member states - chief among them France - will have to present reforms which do not just come under the heading of intentions, but are the subject of “effective decisions”, in detail and applying “in the long term”, Moscovici stressed. His counterpart for the euro, Valdis Dombrovskis, said that the reforms accounted for would have to be included in “an approved or detailed plan with a timetable and estimated budgetary effect”. In such cases, states carrying out these reforms will be able to “depart from the path marked out” and benefit from “four years” to return to the medium-term budgetary objective, he added.
The German finance minister, Wolfgang Schäuble, laid great emphasis on the question of the effective nature of the structural reforms, at the Ecofin Council of Tuesday 27 January.
When is a reform implemented? When it is announced? No. When it is voted in? A bit better. When it enters into force? asked the French finance minister. According to Michel Sapin, this reflection at the Eurogroup will help to “avoid flexible interpretations of the flexibility conditions” laid down in the Pact, “make things predictable” and minimise the process risks “for application on a piecemeal basis” which the Commission, which is responsible for enforcing the European budgetary rules, could run.
Stressing his confidence that the March deadline would be met when speaking to the press, the French minister said that he was confident that the Commission would take account of the 'Macron' bill for the liberalisation of the economy, to apply from July, in its evaluation of the budgetary and macro-economic situation in France. And under the 'Macron' law, other “structural reforms” will stem from the social dialogue in enterprise, discussions on unemployment insurance and pension schemes (Agirc Arrco).
On the provisions of the Pact on the trajectory for the reduction of the debt, Moscovici referred to the work on the concept of 'potential growth' and on the links between public debt and public deficit. This concept has an impact on the calculation of the structural deficit (not including conjectural effects) and ultimately on the structural effort a country has to make, Sapin noted. Spain, Portugal, Ireland and Italy are challenging the details for the calculation of potential growth, he said. On Tuesday, Schäuble insisted on the application of the public debt rule, given that levels of government debt are still high in Europe.
The Eurogroup also took stock of the assessment underway of the draft 2015 budgets of the seven member states (Belgium, Spain, France, Italy, Malta, Austria and Portugal) which risk non-compliance with the Stability and Growth Pact (see EUROPE 11207). It also welcomed the fact that Latvia has presented a revised draft 2015 budget which is in line with the rules of the Stability Pact. (MB)