Brussels, 13/05/2002 (Agence Europe) - The report that the European Commission will be approve, this Tuesday in Strasbourg, on the public finances of the Member States (see EUROPE of 11 May, p.8) confirms its firmness over the redressing of public finances. Through this document, set-out under the responsibility of Pedro Solbes, the Commission maintains its demands concerning:
The countries whose budgets are noticeably in deficit - namely Germany, France, Italy and Portugal - must continue the recovery process and rapidly recuperate the ground lost, in order to respect the undertaking to reach situations "close to balance" in 2004. In particular, Germany and Portugal - whose deficits will dangerously approach, this year, the permitted ceiling, of 3% of GDP - must fully respect the undertakings made last February within the Ecofin Council. On the more general level, it is necessary to avoid that public opinion gets the impression that the rules of the Stability Pact may be modified or circumvented in case of difficulties.
If the economic recovery is confirmed, the Member States must not repeat the mistakes committed in the previous phase of economic expansion, notably during the years 1998-2000, when the increase in revenue had been considered definitively acquired, and had been used either to reduce taxes or to increase spending, provoking budgetary constraints in 2001 and 2002. The Member States that do not yet respect the requirements of the Stability Pact (surplus budgets or close to balance) must use the economic recovery to accelerate the redressing, while the others may fully make use of the automatic stabilisers.
The Member States whose global public debt remains significant - namely Italy, Belgium and Greece - must, to improve their situation, create significant budgetary surpluses during several decades and give priority to the reduction of long-term debt.
All the Member States must take the appropriate steps to tackle the consequences of the ageing population, whose cost is located in the coming decades at between 4 and 8% of GDP.
For the first time, the Commission Communication on public finances dedicates a chapter to the quality" of this spending. The Commission notes that the Member States have been able to improve the make-up of their public spending in the 1990s, but that the qualitative follow-up of public spending is blocked by the lack of comparable and recent data on their functional allocation. Other obstacle: the haze that surrounds the notion of "quality". Also for the first time, the Commission is broaching the issue of the preparation for enlargement by underlining that the difficulty will be to apply the budgetary monitoring framework for the EU to the new Member States, while taking into account their situation and their specific needs. In the shadow of accession, the ten candidate countries from Central and Eastern Europe are in effect confronted with a market economy. The Commission notes that a crucial prior requirement to budgetary monitoring is the existence of reliable and current public accounts. It also invites the candidate countries, in view of accession, to conform with the Copenhagen criteria, rather than try to satisfy those of Maastricht.
Questions on the French government's policy
Questioned on Monday over the intention of the French government to postpone its aim of achieving a balanced budget in 2004, the spokesperson for Commissioner Pedro Solbes recalled three things: - during the talks on the stability programmes at the Ecofin Council in February, Portugal, France and Germany undertook to achieve a balanced budget or close to balanced in 2004 (2003 for Italy); - this aim was confirmed at the highest political level during the Barcelona Summit; - during the Ecofin Council on 7 May, the Ministers supported the Commission's strategy for a healthy budgetary policy and a balanced budget in the medium-term. The spokesperson indicated that if a country reviews its targets on a balanced budget, it must first have to submit a new stability programme to the Ecofin Council. He also recalled that, last February, when Germany wanted to postpone by two years the cut-off date for balancing its public finances, the Ministers for the Economy and Finances did not accept it.