Brussels, 26/06/2008 (Agence Europe) - With the adoption, on Wednesday 25 June, of the 9th report on public finance, the European Commission calls on member states to improve the quality of public finances in order to step up the pace of growth and good governance of Economic and Monetary Union (EMU). According to the communication accompanying the report, this improvement would allow synergies between the main instruments for coordinating economic policy within the EU, in particular the stability and growth pact (SGP). “Although the budgetary situation has improved remarkably in the last few years, it is quite clear that there is still scope for progress in enhancing the quality of public finances”, Joaquin Almunia explains in a press release. More determined action by member states in favour of reducing public debt and deficits would allow them to “free the necessary resources to encourage innovation, investment, education and employment which, in turn, would allow them to face more confidently the challenges posed by globalisation and an ageing population”, the commissioner for economic and monetary affairs said.
In 2007, the budgetary situation improved considerably, the Commission notes (the average deficit in the EU went from 1.4% in 2006 to 0.9% in 2007 and from 1.3% to 0.6% in the eurozone). The public debt continued to fall, passing below the 60% of GDP threshold in the EU and coming close to this in the eurozone. The communication stresses, however, that “the persisting weaknesses in implementation of medium term budgetary projects and the risks weighing on public finance call for the effort to be continued”. Potential GDP growth remains limited in a fair number of member states due to the inefficient use of resources, including in the public sector, the Commission points out. In a context of high inflationary pressure, population ageing and growing global competition, it identifies four areas of action, based on the principles established in its “EMU@10”communication (EUROPE 9656).
The Commission therefore suggests: - more systematic reporting on improvements made to the quality of public finances and on structural reforms in the context of stability and convergence programmes; - strengthened links between political priorities and the allocation of resources, and between resources and results (efficiency and efficacy) - regular budgetary reviews could thus help to rank spending according to priority; - and the improvement of tax systems through tax reforms aimed at simplifying rules to minimise distortion. Alleviation of the high tax burden on income from work through a transfer to broad and stable tax bases could be another element for achieving this; - regular review of the quality of public finance in member states, jointly conducted by the economic policy committee and by the Commission, on the basis of information made available in the stability and convergence programmes and in the inventory of indicators on the quality of public finances. The report and the communication are available on the DG Ecfin internet site: http://www.ec.europa.eu/economy_finance/thematic_articles/article12804_en.htm . (A.B./transl.jl)