Brussels, 14/05/2008 (Agence Europe) - Generally and independently of some qualifications from some countries (in particular France), euro area finance ministers, on Tuesday 13 May, backed the European Commission's view of the economic situation in the euro area. “We fully endorse the European Commission's assessment and forecasts,” said Eurogroup Chairman Jean-Claude Juncker after the meeting (see EUROPE 9652). The finance ministers of the 15 members, then, expect euro area growth averaging 1.7% this year and 1.5% in 2009. These forecasts are “considerably lower” than those of 2007 (2.6% growth) but are perfectly “plausible” in the light of the risks, on the one hand, and economic growth which is nonetheless “solid”, on the other. Inflation remains “one of the main risks” to the European economy and the European Central Bank (ECB) has no intention of relaxing the straitjacket of its monetary policy by reviewing its objective of price stability. The ECB “always wants us to reach an inflation figure of 2%,” said Juncker, dismissing any risk of recession in Europe, though remaining “vigilant”. The inflation level is “not what we would have wanted” and “we call on social partners to continue their wage restraint of the last few years,” he said, mindful of second round effects on wages. This is a repeated call, which acknowledges also the responsibility of governments and which, this time, was accompanied by a strong attack on the excessive salaries paid to some company bosses.
“We urge governments which index-link wages or have semi-automatic indexation to manage this mechanism cautiously,” said Luxembourg Prime Minister Juncker firstly. His country and Belgium are the two most affected. “We don't want governments to feed domestic inflation though excessive public administration wage policies,” he added, stressing that member states should abandon administered prices and not increase their indirect taxation levels. These recommendations were in part taken up in a document, adopted on Tuesday evening, which sets out Eurogroup's joint approach to wage developments. Responses to price increases include: - wage rises which are in line with productivity increases and are job and competitiveness promoting; - the implementation of structural reforms to improve productivity and competitiveness (especially in the services sector); - implementation of energy policies (improving energy efficiency and energy saving); - removing obstacles to employment (reform of the labour market).
Aware of the impact of inflation on the purchasing power of the most vulnerable groups, and so as not to give the impression that the call for wage restraint was finance ministers' only message, Juncker then criticised some fat-cat payments for bosses. “Excessive salaries paid to company bosses, which we have seen in several countries and in several sectors of the euro area, are quite scandalous,” Juncker said, and he intends “to consider fiscal instruments that could be put in place to combat such excesses”. The idea is “no longer to accept that, in fiscal terms, certain kinds of remuneration (Ed: such as golden parachutes) can be deducted from tax thresholds and be considered as general costs”. He went on: “This is a matter of the highest importance because we run the risk of not being understood by our fellow citizens if we always call for wage restraint … without, at the same time, saying that it is no longer acceptable for some company heads to be paid massive salaries and, above all, to benefit from golden parachutes which are not related to measurable performance”. For the moment, member states have been invited to inform the Commission of the measures they have taken or intend to take to tackle this “social scourge”, he added. This issue is, however, a matter for the EU and it is one that all 27 member states may soon address. Perhaps it goes further even than that, since international action is needed, Juncker said. As Economic and Financial Affairs Commissioner Joaquin Almunia pointed out, the situation varies from one country to another. Some dozen member states have rules on payments to company heads, but these laws vary widely. In December 2004, the Commission adopted a recommendation on payment of company bosses with a view to improving company governance. But an implementation report, published in July 2007, demonstrated that the follow-up to these recommendations had not been satisfactory, the commissioner said. (A.B.)