Brussels, 14/05/2002 (Agence Europe) - In Strasbourg on Tuesday Commissioner Pedro Solbes outlined to the European Parliament the main aspects of the communication and 2002 report on public finances in the Member States that the European Commission adopted the very same day. He said that the Member States' budgetary behaviour could be seen as acceptable since it was a particularly difficult year, but nuances were needed in terms of France, Germany, Italy and Portugal, he said, laying particular emphasis on the German and Portuguese budget deficits. Germany and Portugal have expressed a desire to return to budget equilibrium in 2004, noted the Commissioner, hailing the agreement that has just been reached on the management of public finances by the German federal government and the Länder. He added that the most serious problems encountered in 2001 and 2002 were due to the fact that some countries had not taken advantage of the strong growth between 1998 and 2000.
Responding to a question by Luxembourg Socialist Robert Goebbels on France's postponement of its commitment to reach a close to balanced budget in 2004, Solbes pointed out that the Commission was not in favour of this, saying that if one continued to postpone the Stability and Growth Pact objectives, countries will never be able to deal with possible imbalances caused by changes to the economy, adding that the 2004 date had been accepted by the ECOFIN Council and confirmed by the Barcelona European Council. He added that the austerity measures taken by the Portuguese government went in the right direction but what was of concern was the 2.8% public deficit estimate in 2002.
Published at the same time as the third annual report on public finances in the EMU, the Commission's communication approved on Tuesday seeks to extend the debate beyond the aim of stability to the positive and potential contribution that public finances can make to growth and employment, as well as to the problem of progressive integration by candidate countries in the EU's budgetary surveillance process. The Commission repeats that budgetary policies must be sound throughout the economic cycle, including in the upward phases, and that tax reductions and increased spending should, in particular, find sustainable financing and not be solely based on the automatic consequences of growth. The communication also stresses that the four countries of the euro area that still have arge deficits (Germany, France, Italy and Portugal) must re-launch their process of imp[roving the budget and reach positions "close to a balance or a surplus" within deadlines that comply with their undertakings. As for the ageing of the population, it raises a serious budgetary problem in all Member states, notes the Commission, stipulating that several of them risk being confronted by imbalances. It then stresses that the ambitious reforms implemented by several countries contrast with the fragmentary approach adopted by others. "that are measured by the size of the problem". Finally the Commission considers that the integration of candidate countries in the budgetary surveillance mechanism of the EU will have to take account of the depths of the structural and institutional reforms that are going on in those countries, but "without forgetting the importance of healthy budgetary policies".
Generally speaking, the Commission observes that the downturn in the economic activity has raised the level of deficits in most Member States and within the euro zone as a whole. However, the framework of budgetary surveillance, and especially the Stability and Growth Pact (SGP) has worked reasonably well. Member States had a larger margin to allow the automatic stabilisers to play their role and hedge against economic slowdown and they avoided the errors of the past be refraining from launching into unwarranted expansionist policies, notes the report, nevertheless stipulating that it is essential that budget improvements resume so that all attain the goal of a balance set by the Pact, especially if they want to credibly tackle future budgetary costs linked to the ageing of the population.
In terms of the quality of public expenditure, a subject being tackled for the first time, the Commission said that Member States had been able to cut and improve the breakdown of their expenditure and the size of the public sector in the 1990s, but refused to draw any definitive conclusions, feeling that additional microeconomic analysis was required.