Brussels, 15/06/2005 (Agence Europe) - Caio Koch-Weser, president of the Economic and Financial Committee (EFC) affirmed on Tuesday, when addressing the parliamentary economic and financial affairs committee that the “stability and growth pact remained very strict, we can't distance ourselves from reference values”, even after its reform and the corrections that have to be used for the excessive deficits, which have to be prompt.
In his introduction, Koch-Weser referred to the improvement in government statistics which EU finance ministers adopted in last week's conclusions (EUROPE 8962) and the integration of the financial markets. Koch-Weser stressed that the memorandum of understanding on cooperation in financial crises will enter into force in July and in spring 2006 the EFC would prepare a simulation of a crisis management situation between all the actors involved in this memorandum (central bank governors, banking supervisors and for the first time, finance ministers) as well as pursuing the identification of policies facilitating financial market integration (EUROPE 8948). He explained that in connection with the adoption of the euro by the new Member States, he welcomed the recent entry into the European exchange rate mechanism (EER 2) of Cyprus, Malt and Latvia (EUROPE 8940) but warned that this did not mean “a waiting room” on the path towards the common currency and that there were criteria to respect. Koch-Weser acknowledged that there was “considerable uncertainty” about the recovery of the European economy. He explained that, “recent data is not encouraging: improvements in the labour market have halted, there is no sign of any substantial improvement in domestic demand…but in the medium term, conditions for reinforcing recovery are in place”. He warned against any “excess of pessimism”. In response to Friedrich Hoppenstedt (EPP-ED, Germany), who referred to the strategy of the seven most industrialised countries to reduce imbalances in the world economy, Koch-Weser pointed out that much greater flexibility in currencies was expected in all Asian countries, “not only in China”. Koch-Weser unsurprisingly disagreed with Paolo Cirino Pomicino (EPP-ED, Italy), who considered that in the application of the revised stability pact, they needed to concentrate on reduction of the deficit and leave the debt alone (which is particularly high in Italy) so as not to damage growth. Luxembourg socialist Robert Goebbels, who deplored the fact that the only guideline from the economic and financial committee was to call for structural reforms when countries that had reformed their labour markets were experiencing high levels of job insecurity. Koch-Weser pointed out that the Lisbon strategy was not a “Christmas tree” and they had to look at the long term results which did not provide compensation in the medium term. He reiterated the fact that some countries would suffer in the short term before the effects were felt. The EFC would continue to examine divergences between Member States' growth, asserted Koch-Weser, warning that, “if these divergences increased they would also need faster and more far reaching reforms”. Koch-Weser recognised that, “we have work to do” on this subject, particularly in regard to Eurogroup.