Brussels, 25/04/2016 (Agence Europe) - In Amsterdam on Saturday 23 April, the European finance ministers discussed how to make the Stability and Growth Pact more predictable, for instance by increased use of public expenditure-related indicators as a basis.
“We did not discuss to change the (Stability and Growth) Pact”, but how to improve the evaluation of its application, the President of the Eurogroup, Jeroen Dijsselbloem, said after the informal ministerial meeting. He said that the ministers' opinions were beginning to converge over the idea that the emphasis could be laid on the public expenditure rules. “Why? It is directly in the hands of the ministers of finances. It gives more guidance in the process of designing the budget”, he said. He explained that the indicator related to the structural deficit (not including conjunctural effect), although “valuable”, remains “theoretical”.
Acknowledging that the structural deficit was “difficult to evaluate”, the Commissioner for the Euro, Valdis Dombrovskis, confirmed that the European Commission was looking at how to reduce the number of indicators, instead focusing on those within the ambit of the finance ministers, such as the evolution of expenditure, which provides “greater clarity”, on both an ex ante basis, for the targets to be met, and ex-post regarding the results achieved, and the new measures to increase revenue. However, “this does not mean that we put aside the deficit and debt objectives”, he stressed.
In late March, eight member states (Spain, Italy, Latvia, Lithuania, Luxembourg, Portugal, Slovenia and Slovakia) officially called for a revision of the method to calculate the output gap, in other words the difference between the potential growth of a state and the growth actually achieved (see EUROPE 11523). Amongst other things, they feel that the time horizon used as a calculation basis should be four years, rather than the period of two years currently used.
“Potential growth cannot be observed but only estimated, and there are a number of ways of calculating it, all of which are respectable. But here, the question becomes political, because its evaluation is different depending on the calculation method used”, argued the Italian Minister, Pier Carlo Padoàn. Depending on the method used, Italy could be “greatly penalised, whilst other countries may benefit”, he added, hence the potential existence of a “difference of treatment” in the measures to be taken for the different member states.
According to Dijsselbloem, the point made by the eight countries is a “very fair” one. For this reason, the states have asked the European Commission and the Council experts to consider the possibility of bringing the forecasts into line over a four-year period. As regards the output gap, we need to be “realistic”, as there is “no perfect method”, Dombrovskis said, adding that his estimate will always be an “approximation”.
France raised the issue of the accounting treatment of the medium-term budgetary measures. It feels that the European Commission should take account of savings commitments, rather than the point in time from which they have been put into practice.
In the autumn, the Ecofin Council will return to the question of making the EU budgetary rules simpler and more predictable. (Original version in French by Mathieu Bion with Elodie Lamer)