Commissioner-designate Paolo Gentiloni did not rule out reform of the Stability and Growth Pact to support investment in the environmental sector on Thursday 3 October during his hearing before the European Parliament's Committee on Economic and Monetary Affairs.
Responding to a question from Raffaele Fitto (ECR, Italy), he thought it necessary to consider a change in European fiscal rules. Indeed, “if we remain on the level of clarifications to the Pact, many of these objectives” - fighting climate change, promoting economic and social convergence - “will simply become unrealistic”, he said, noting the position expressed along these lines by the European Fiscal Board (see EUROPE 12325/17).
Although he went further than he had in his answers to MEPs' questions (see EUROPE 12337/13), Mr Gentiloni remained cautious: any decision on the way forward - legislative reform or clarification of existing rules - will only be taken after a period of reflection and consultation that will last until the end of 2019. Moreover, this reflection should, according to him, focus on how to “simplify the rules, apply them better and make them more counter-cyclical”.
The Social Democratic family, to which Mr Gentiloni belongs, is calling for a reform of the Pact to exclude ‘green’ investments from the deficit calculation, or even a specific golden rule such as the one introduced after the sovereign debt crisis that required Member States to have stable public finances.
Several MEPs, including Markus Ferber (EPP, Germany) and Enikő Győri (EPP, Hungary), asked how the Commissioner-designate would act independently in applying European fiscal rules when he himself was head of government in Italy, a euro area country suffering from sluggish economic growth and excessive public debt.
“I will not be the representative of a government”, and “there will be no double standards in the application of the rules”, he promised, referring to the “potentially destabilizing” nature of excessive public debt in the event of a downturn in the economy.
Mr Gentiloni finds himself in the situation of having to prove himself, as was the case five years ago for his predecessor, Pierre Moscovici, former Minister of Finance of France, which was at the time in excessive deficit.
Nevertheless, he intends, “when necessary”, to apply the “flexibility” already present in the Pact to support investment and structural reforms. This is “not a concession” to a particular country; it is provided for in the Pact, he said. And he refused to comment on Italy’s draft budget plan for 2020, discussed earlier this week in Rome.
The Italian government formed by Movimento 5 Stelle and the Social Democrats is aiming at a public deficit of 2.2% of GDP (1.8% in 2021 and 1.4% in 2022) for a growth rate of 0.6% of next year’s GDP, excluding any VAT increase. Italian debt is therefore expected to rise further, to 135.2% of GDP in 2020, before beginning a slight decline the following year.
European unemployment reinsurance mechanism. Asked by Luis Garicano (Renew Europe, Spain) and José Manuel Fernandes (EPP, Portugal), the Commissioner-designate provided some direction on the European unemployment reinsurance mechanism that he will be responsible for setting up at the euro area level.
This mechanism, which will support national instruments, could take the form of liquidity assistance or budget support, Gentiloni said. Wanting to be “ambitious”, he seemed to favour the fiscal path, even if the provision of liquidity is “simpler and faster” to set up. However, he stressed, any mechanism should prevent “permanent fiscal transfers”, respond to external macroeconomic shocks, be rapidly available and not weaken the structural reform process.
Asked by Gabriele Bischoff (S&D, Germany) about how to strengthen the social dimension of his portfolio, the Commissioner-designate reiterated that he must integrate the UN’s sustainable development objectives into the ‘European Semester’ budgetary process.
Establishing a “fair” tax system. On tax issues, Paolo Gentiloni indicated his determination to work toward a “fair” system in the EU.
His first priority? “Put in place a tax policy that will allow for a ‘green’ Europe”, he said, promising an update of the ‘energy taxation’ directive (see EUROPE 12328/9) and a ‘carbon tax’ at the EU’s borders.
In response to Sven Giegold (Greens/EFA, Germany), he committed to presenting an action plan for a “fair and green tax system”, including legislative proposals for a minimum corporate tax rate and a kerosene tax for the aviation sector.
Aware of the obstacle to tax harmonisation posed by unanimous decision-making in the EU Council, the Italian Social Democrat reiterated his commitment to use the ‘bridging clause' (Article 116 TFEU) and other means to move to qualified majority voting in the EU Council and the ordinary legislative procedure in the area of taxation.
But he dodged the issue when asked to name concrete legislative proposals currently blocked in the EU Council that could be the subject of this clause.
Manon Aubry (GUE/NGL, France), who criticised the shortcomings of the European ‘black list’ of non-cooperative jurisdictions in terms of taxation, admitted that more needed to be done, despite the progress already made in this area. “The ‘soft power’ of the European ‘black list’ is very strong [...] and is changing attitudes in many of the worst tax regimes in the world”, he said.
Like Eero Heinäluoma (S&D, Finland), several MEPs wanted to confirm that the Commissioner-designate would not give up on digital taxation. “Less pessimistic than a few months ago” as to a possible international solution at the OECD (see EUROPE 12299/10), he promised a “European proposal” in case of failure, perhaps in the third quarter of 2020.
Positive assessment. Mr Gentiloni's performance was approved by a majority of the coordinators of the EPP, S&D, Renew Europe, Greens/EFA and ECR groups, although the Christian Democrats criticised his sometimes “vague” answers. (Original version in French by Mathieu Bion and Marion Fontana)