Brussels, 19/01/2005 (Agence Europe) - In a discussion at the European Parliament's Economic and Monetary Affairs Committee on Tuesday afternoon, the acting President of the ECOFIN Council, Jean-Claude Juncker, said he would be pulling the stops out to ensure good reform of the Stability and Growth Pact in the scheduled time period (by March of this year). He said there had been encouraging results at the most recent Eurogroup and ECOFIN Council meetings but also divisions over how to adjust the public debt criterion (see Europe of 19 January, pp 6 and 7) and urged Member States to avoid extreme positions so progress can be made on reform.
In his introductory speech, Juncker said it was natural for the Stability and Growth Pact to be reviewed after more than five years in operation, saying that adjusting the Pact was not an 'obscene gesture'. He warned against extreme positions being taken by the different players, describing this as the 'temptation of extreme positions' - some people calling for no change whatsoever and others wanting total change. He said no progress would be made on reform of the Stability Pact if Member States took extreme positions. He said he was reasonably optimistic about the chances of reaching common ground at the ECOFIN Council in the form of a common position ahead of the 22 and 23 March European Council.
Jean-Claude Juncker said that all EU Member States agreed that it was necessary to strengthen the preventative aspect of the Pact so Member States prioritised the building up of surpluses in good years - a mechanism would be needed to ensure compliance with this - and to introduce and element of flexibility in to the corrective aspect, so that the particular circumstances of each case were taken into account. He said there was now no disagreement among finance ministers on the need to add more elements to the mechanisms. They also agreed there should be no weakening of the Commission's rights, particularly launching the excess deficit procedure. The discussions at Eurogroup and the ECOFIN Council had revealed that some questions had not yet been settled, like how exactly to define an economic boom (taking account of output gap or growth potential). The Economic and Financial Committee had been asked to look at the issue in more detail. There was also disagreement about 'relevant factors' in budget surveillance and which institution would be selected to take account of them (the Commission, Council, or both), and on the targets to be achieved by a country whose deficit had overshot the 3% GDP cut-off point as part of its effort to return to the Pact. The notion of public debt was also a tricky issue to understand and resolve.
Answering questions about public debt, Juncker said it should remain an important area in assessing a country's budget deficit situation, pointing out that the impact of a current deficit of over 3% of GDP was different for countries like Luxembourg with national debt of only 4% of GDP than for those with national debt of over 100%. Juncker said there was some support among finance ministers for setting debt reduction targets for countries with debt of more than 60% of GDP, like bringing debt down to 100% GDP in two years, then 95% and then 90% etc.
Juncker says Germany is not planning to opt out of the Stability Pact
In response to questions from Alexander Radwan (CSU), Ieke van den Burg (PES, the Netherlands), Udo Bullmann (SPD) and Karsten Friedrich Hoppenstedt (CDU) about statements by Chancellor Schroder on boosting economic growth through application of the Stability and Growth Pact (see Europe of 13 January, p.13, and 18 January, p.7), Juncker said that at the ECOFIN Council, all countries had agreed not to exclude who blocks of expenditure from the Pact. The Luxembourg Presidency is not even going to discuss the issue, seeing it as 'not even a matter for debate'. He said Schroder's remarks had often been badly interpreted and certainly didn't mean that Germany wanted to opt out of the Pact. Germany doesn't want whole blocks of expenditure to be excluded, said Juncker, but rather for certain criteria to be taken into account. Juncker said the European Commission supported many of Schroder's ideas, adding that he himself had read Schroder's statements in English and German in the Financial Times and Financial Times Deutschland, and then explained in French.
Mr Juncker explained to Mr Radwan that an agreement has been reached in Council to define criteria for assessing the deficit situation (requirements are different when it is a provisional situation of deficit or a deficit “beyond control”). “I don't mean that a deficit due to noble expenditure is fully justified, but I feel that this should be treated differently”, Juncker explained. He reassured Mr Radwan and Christopher Huhne (ALDE, Britain) that ministers do not wish to restrict the Commission's powers and that it was out of the question to treat the large and small EU Member States differently.
Juncker distances himself from the ECB
Jean-Claude Juncker told MEPs that the changes to the Pact's rules would not endanger single currency. He admitted that he did not share the opinion expressed by the European Central Bank (ECB), which feels that any change in the financial regulations would compromise the euro's stability. Also, he stressed the importance of a strong and stable euro and was adamant about the fact that it was a matter of confidence - in the broadest meaning of the word - granted to European single currency.