Brussels, 24/01/2001 (Agence Europe) - The Commissioner for Economic and Financial Affairs Pedro Solbes announced, on Wednesday to the press, that the European Commission, in ruling this Wednesday on the stability programme for Ireland, had, for the first time, decided to propose to the Council to adopt a recommendation with regards to this country, so that it adopts the measures necessary to put an end to the inconsistencies between the expansionist aspects of its budgetary planning and the broad economic policy guidelines. The Ecofin Council of 12 February could thus adopt a recommendation under Article 999 paragraph 4 of the Treaty, which foresees that, when it is noted that the policy of a Member States is not in accordance with its guidelines or that it risks compromising the proper functioning of the EMU, the Council may, ruling by qualified majority, "address the necessary recommendations" to the State concerned. What will be these recommendations? It fall down to the Council to decide whether to make them public or not, reminded Mr Solbes when answering this question, while noting that, in the face of the risk of a future overheating of the Irish economy, Dublin should follow a tighter fiscal policy. The rate of inflation in Ireland in 2000 being on average 5.6% compared to a forecast of 3.1%, even if the rate of last December was slightly below the "peak" of November, while the budgetary forecast for 2001 is expansionist and risks boosting demand and thus accentuate the overheating, underlined Pedro Solbes. Questioned over the participation of the Irish Commissioner in the discussion by the College, Mr Solbes asserted that David Byrne had played a part which was his, by explaining the "particular sensitivity" of the country which he knows especially well. For the remainder, Mr Solbes underlined that the up-dated stability programme was in accordance with the Stability Pact, that the Irish economy is "doing very well", with the strongest growth of the EU, an "excellent budgetary surplus" (4.7% in 2000) and a good situation with regards to employment.
More generally, Mr Solbes noted that the other up-dated stability programme and the convergence programmes examined by the Commission where in accordance with the requirements of the Stability Pact and with growth, and noted with satisfaction that the issue of sustainability of public finances finding its way against the problem of the ageing population is starting to be incorporated into the programmes - as, he underlined, after unemployment, this will be the biggest future challenge to the EU. Furthermore, Mr Solbes noted:
(1) with regards to the stability programmes of four other EMU member countries:
Greece: its first stability programme since its entry into the Euro zone - shows robust economic growth and progress in budgetary consolidation (a budgetary surplus of 0.5% of GDP is forecasted for 2001, while the ratio of public debt should fall by 20%, to fall in 2004 to 84% of GDP: Ed), but the prospects concerning inflation seem to underestimate the risks of overheating, and the budgetary policy could prove to be insufficiently rigorous to counter them.
France: according to the Commission, France could have gained in 2000 better budgetary results, given the favourable development of the economy and public finances (the deficit fell to 1.4% of GDP). "I am not excessively indulgent" with regards to France, answered Mr Solbes to a question, by admitting that in this programme there are "elements we do not like." In particular, the increase in fiscal receipts should have been used to further reduce the public deficit and debt. Moreover France is only planning to balance the budget in 2004, while the Commission would have preferred "accelerating the process".
Italy: the Commission reproaches Italy mainly for its public debt, "still high" (112.1% of GDP in 2000, with the prospect of a fall to 94.4% in 2004), said Mr Solbes, for whom the government must thus accelerate its restructuring process and continue, in particular, its efforts to reform the pensions system. Certain elements of the budgetary law for 2001 do not seem sufficient to achieve the targets set, felt Mr Solbes, while admitting that a series of measures taken by the government would have positive effects this year. To the question of knowing if Italy can or not reduce taxes, he replied that the Commission is in principal in favour of such a measure, but only if certain criteria are taken into account, including that, fundamental, the country in question respects its obligation to lower its public debt, "in a relatively rapid manner", to 60% of GDP.
Austria: the programme foresees in particular a "major shift" in the Austrian budgetary policy, with a "much faster" reduction of public debt than foreseen (55.3% of GDP in 2004). However, Mr Solbes underlines that Austria must implement a stricter fiscal policy in 2001 and 2002 if it wants to achieve the objectives set in terms of deficit.
(2) with regards to the convergence programmes for two countries which are not part of the Euro zone (let us recall that that of the third country, Sweden, was already given the go-ahead by the Ecofin Council: see EUROPE of 20 January, p,8):
United Kingdom: Mr Solbes revealed in particular the "healthy surplus" expected until 2001/2002 that will however be followed by deficits (around 1% of GDP) in the three year afterwards. The British accession of the "European exchange rate mechanism 2" could have positive effects, he felt, while noting that such an accession is "voluntary" and not "legally binding."
Denmark: Mr Solbes recognised for this country the merit of having made in particular efforts to take into account the consequences of the ageing of the population, and calls on it to continue down this path in the future. Denmark continues to easily meet the requirements of the Stability Pact, notes the Commission, while noting that its debt should fall to around 35% of GDP in 2005.