The Luxembourg press deserves far more attention than it gets. Not just because it's as respectable and interesting as any other, but also because it often supplies us with the thoughts and views of Jean-Claude Juncker, who, in a couple of weeks' time, will be the President of the Eurogroup (for two years) and of the Ecofin Council (for six months), and of the European Council too, just for good measure. Under his Presidency, we will see the revision of the Lisbon Strategy (in March) and the adjustment of the Stability Pact (in June), which are undeniably two enormous priorities of the EU in the field of economics.
For the Lisbon Strategy, we will have to wait for the Commission's proposals, which have been announced for the end of January. Mr Juncker has doubtless got his own ideas already, but he will discuss them with Mr Barroso first. For the Stability Pact, on the other hand, the Commission's basic text is already in place, the Commissioner responsible remains the same (Joaquin Almunia), and the Council has already started to debate it. This means that Mr Juncker is quite at liberty to confirm and perfect his views, some of which we already know, and we can even quote them, from the "Voix du Luxembourg" of 17 November (our translation throughout). So I will take on the responsibility for compiling Mr Juncker's views on the subject.
1. The reluctance of the European Central Bank (ECB). "The idea that a reflection on the Pact is a sin against stability seems ludicrous to me. The aim of political action cannot be to make the status quo concrete. We need to adjust the Pact (…). The text is not adequate, but it only needs a few minor tweaks. It is odd that the ECB is trying to make out that we are taking the Pact to pieces. Thinking about the consequences of this is not a sin. A catalogue of assessment criteria is not an incentive to start slipping".
2. Sanctions are needed, but their application must be revised. "The Pact without sanctions is like a tiger without teeth". Excessive deficit proceedings must be started when they are needed, but they shouldn't have to be followed right the way through every time. "The Pact must be defended preventively: during periods of growth, we must use the surplus to reduce deficit and debt. We need a mix of automatism (to kick off the proceedings and apply the rules) and assessment elements".
3. Assessment of the deficits. You cannot remove entire blocks of expenditure from the calculations. "I am not at all a fan of the idea of removing [from the calculation of the deficit] entire blocks of expenditure. Some ministers are proposing to include this expenditure, some to remove others. Some feel that military expenditure should be exempt, others think research, or the contribution to the European budget, or development aid. We would end up with nothing in the national budget except public administration, which would no longer reflect the country's budgetary and fiscal behaviour. We need both a budgetary and an economic line of reasoning, assessment criteria allowing the budgetary situation of a country to be judged more broadly, taking account of such elements as investment, research, the contribution to the Community budget, structural measures (notably in terms of social protection, especially in terms of ageing)".
4. Taking global debt into account. "A country with public debt of 4.5% of GDP should be judged differently to the others (…). We must not give the impression that budgetary deficits boost growth. A permanent state of deficit does not permit growth".
5. Negotiations and deadlines. "Some people start off saying no, then say yes. Without rewriting the Pact, let us amend it (…). I believe that it will all be done under the Luxembourg Presidency". This means by the end of June, because the revision of the Pact comes under the competency of the Ecofin Council and of the European Council.
Differences of opinion. The first ministerial debate confirmed that the attitude of the Member States has moved on. Previously, there was a rift between those in favour of change, and those who opposed it. Now, on the basis of Commission and (intergovernmental) Economic and Financial Committee documents, all ministers agree to a revision in principle, but one which leaves the ceiling of 3% unchanged (maximum percentage of GDP), or the objective of 60% of the self-same GDP for maximum overall debt. On the changes to be brought into the application of the rules, differences of opinion are still many and serious (see our bulletin of 17 November, p.14). The first concerns the criteria for assessing the deficit, and on this point, the aforementioned guidelines of Mr Juncker are essential. The second relates to the reduction of debt. The Commission's documents calls only for a "satisfactory procedure" to bring it down, but the intergovernmental committee goes one step further by outlining a "reduction timetable". Italy is the most opposed to this step, and is looking for back-up which will be hard to find, because other large countries, such as France or Germany, are more worried about the rules on annual deficit than debt. The search for a compromise has only just started. It will be the job of President Juncker to find it. (F.R.)