Brussels, 05/05/2006 (Agence Europe) - Macroeconomic disagreement between Member States in the eurozone is not really a problem at the moment, said Jean-Claude Juncker on Thursday evening after the Eurogroup meeting he had chaired. Luxembourg's prime minister and finance minister said this was normal in a currency zone like the eurozone and there was no reason for concern unless the disagreements show signs of getting deeper. The eurozone finance ministers would remain vigilant, he said, because continuing disagreement could pose certain problems, adding that tight budget correction policies based on solid structural policies were required. The main reason for the disagreements is structural, EU Economic and Monetary Affairs Commissioner, Joaquin Almunia, went on to explain, repeating the need for better upstream coordination of budget policies.
While analysis of the general economic situation confirms that the economy is continuing to pick up and is close or even slightly above the eurozone growth potential, the main dangers facing the eurozone are the hike in oil prices and global imbalances. Jean-Claude Juncker said the ministers were constantly in discussion about this with their partners, particularly in the United States and Asia. He said the cause of the imbalance did not lie in Europe and it was largely the responsibility of the EU's partners to remedy the problem. Specifically mentioning pay rises in the eurozone, the ministers said pay rises would in any case have to match the rises in productivity characteristic of the eurozone's national economies.
Commissioner Almunia said that the impact of the rise in crude oil prices was not significant in terms of growth or inflation, but he said ministers had had a preliminary debate about how to share the burden equally. He said they had started to consider how to extend dialogue with big companies, which seem to be the big winners here, and this is beginning to irritate huge swathes of public opinion, said Juncker, but refused to be drawn on the issue. He said he didn't believe a cut in duty on oil products would send a good message to oil producing countries, adding that he hoped that no countries would unilaterally introduce such cuts. Ministers in fact repeated the statement they made at the Manchester ECOFIN Council in September last year, pledging to not take any measures likely to cause distortion of competition among Member States. Juncker said the ministers had firmly resolved to ensure they had common indicators for Member States' budget procedures in terms of rising oil prices by mid-summer, with the aim of moving in the direction of more coherent hypotheses. Member States currently base their forecasts on their own hypotheses which can diverge to a considerable extent. Nothing has yet been done in this field, and such a move would be a considerable breakthrough in terms of budget coordination.
Calling for greater openness about EU oil reserves, Juncker stressed the significant impact on oil prices of the US announcement about increasing its oil reserves, but the current gap between information collected by the Member States and publication of these figures by the European Commission does not appear to be of the order to lead to falls in the price of oil.
Ahead of the European Commission's unveiling of its spring forecasts (on 8 May), the ministers also discussed upcoming deadlines under the Stability and Growth Pact, but did not go into any detail (debate will intensify in the next few weeks). Application of the revised Stability and Growth Pact has already shown that it is the countries which have not been able to bring their budget deficits down to the required levels in a period of growth which are facing slippages, and this should encourage greater rigour and tightening of the belt. Juncker said it was also the least performing countries in terms of growth which should aim to bring themselves up to the level of the countries with better growth records.
Asked about the European Central Bank's interest rate policy, Juncker refused to comment, apart from noting the eurozone's remarkable resistance to rising oil prices and the fact there had not been any rebound effects. But he said the ministers had also seen that there were a number of monetary aggregates which might lead the European Central Bank to decide what Trichet had seemed to suggest the day after the Governing Council meeting (see EUROPE 9185).