Luxembourg, 09/06/2009 (Agence Europe) - In the course of its annual mid term review of eurozone budget policy, the Eurogroup continued its discussions on Monday 8 June on adjusting budgetary strategy in order to place public finance on a more sustainable path. Return to budget consolidation will come about once there is growth but not before, although there may be differences from one country to the next.
Return to budget consolidation predicted as of 2010. “Fiscal stimulus must be combined with a strategy that safeguards the balance of mid term public accounts”, stressed Joaquin Almunia, for whom the strategy for overcoming deficits should begin in 2010, if there is growth. “We have sought to determine, on one hand, how to coordinate measures for fiscal stimulus and, on the other, when to put an end to these measures so that budget consolidation can begin”, the commissioner for economic and monetary affairs explained during a press conference. If the scenario for economic recovery is played out with a return to growth next year, then “I think this is the moment to start implementing an exit strategy” and to move forward towards consolidation, he said. The gradual withdrawal of budget measures must be “adapted to the rate of recovery”, Eurogroup Vice-President Elena Salgado Mendez said. Standing in for Jean-Claude Juncker, who was engaged in talks on the formation of his next government, the Spanish minister for the economy and finance thus pointed out that “the shape of recovery is probably going to be different among different countries”. Current uncertainties, therefore, do not allow a precise deadline to be given or medium-term objectives (MTO) to be defined for now. These MTOs, which take into consideration future spending that will weigh on public finance because of the ageing population, establish the timeframe within which governments should bring public finance at least back to balance.
Application of Stability and Growth Pact (SGP). As announced (EUROPE 9915), the commissioner confirmed to ministers that he intended to open several excessive deficit procedures (EDP) in the near future against eurozone member states that exceed the 3% threshold this year (the same will be true for EU member states as a whole). The next due date will concern Malta (as well as Lithuania, Poland, Romania and Latvia), against which the Commission has already adopted reports under Article 104§3 of the Treaty. The Commission will recommend that the Council note, from July, the existence of excessive deficit and suggest a deadline for correcting the situation. In the autumn, the Commission will launch the procedure against eight eurozone countries (Germany, Austria, Italy, Netherlands, Portugal, Slovakia and Slovenia) and the Czech Republic.
“We are all of us, ministers and Commission, aware that we need to use fully the flexibility we introduced in the revised pact in 2005 and at the same time we are fully committed to preserve the SGP, to stick to the rules and to reinforce the credibility of this budgetary framework, precisely now that fiscal policy is the instrument to cope with the crisis”, the commissioner stressed. The Commission will continue to apply SGP rules as they exist and it is pointless to envisage any relaxing of the Pact, as a number of comments from the French minster had intimated, suggesting separate analysis of the deficits resulting from the crisis. “I have explained, in particular to Ms Lagarde that, in information released by Eurostat or DG Ecfin, we always include figures for structural deficit and not only for headline deficit. So you can distinguish the part of the deficit which is due to the crisis and the part that is due to structural reasons”, Mr Almunia explained. When it comes to presenting the debt, the Commission sticks to the current rules which prevent splitting the amount of the debt due to the crisis from that resulting from other causes. “If some national governments or national authorities want to do so they can do it”, he said. Ms Salgado Mendez took the view that it is up to the governments to explain things to the public and “we have all agreed that the Commission has to be the guardian of the SGP and initiate the EDP regarding nominal deficit not the structural deficit”.
Confirmation from Jean-Claude Juncker. Upon arriving at the meeting, Jean-Claude Juncker confirmed his intention to remain at the head of the Eurogroup by obtaining a portfolio that would allow him to do so within the next Luxembourg government (EUROPE 9914). Evoking the possibility of obtaining part or all of the post of minister of the treasury, he pointed out that “all Eurogroup ministers are not finance ministers. We have ministers of the economy and ministers of the treasury”. He went on to add: “What is authorised for others could be authorised for me”. Ms Salgado Mendez and Mr Almunia seem to have no doubt about this. “As he has again been the winner of the election, I suppose he can organise his government as he wishes”, the commissioner said. “If he continues as minister he will continue as the president of the Eurogroup”, the Spanish minister explained. (A.B./transl.jl)