Göteborg, 01/10/2009 (Agence Europe) - An informal meeting of EU finance ministers and central bankers opened in Göteborg, Sweden, on Thursday 1 October 2009 with an updating of the situation surrounding EU Member States' exit strategies for paying back the debts they took on to boost the economy. There are signs of economic recovery but the participants believe it is too soon to halt the recovery programmes, the main cause of the excess budget deficits. The drawing up of national exit strategies will be announced later today and, economic recovery permitting, they will be introduced by 2011 at the earliest. After a meeting of the Eurogroup (eurozone finance ministers) that he chairs, Luxembourg's prime minister, Jean-Claude Juncker, said the time has not yet come to end the recovery programmes because the hints of economic recovery are fragile. He added that if the recovery were sustained into 2011, it would be possible to implement in 2011 the exit strategies due to be prepared later on Thursday. The President of the European Central Bank (ECB), Jean-Claude Trichet, said that unsustainable budget deficits had to be corrected as soon as possible, meaning as soon as the recovery starts and certainly no later than 2011. The flexible Stability and Growth Pact rules must be respected, he added. EU Economic and Monetary Affairs Commissioner Joaquín Almunia said that exactly what an exit strategy was had to be considered right now, along with the fact that putting it into practice in each country would take place when the economic recovery is sustained. He said sustainable economic recover would be when growth forecasts matched or outstripped growth potential without the aid of special budget recovery measures to stimulate consumption and investment.
The discussions of the exit strategies continued over lunch, when the eurozone ministers and bankers were joined by their colleagues from outside the eurozone. Swedish finance minister Anders Borg said that Member States agreed on the wording to be used to draw up their exit strategies but disagreed with the 2011 timeline as a possible starting point for putting the strategies into practice. He said the subject would be one of the most highly discussed issues at upcoming ECOFIN Council meetings. Some commentators suggest that the United Kingdom is not happy about setting a date for the exit strategy before economic recovery is certain. On Wednesday, Anders Borg expressed concern that budget policy in Europe was not on a sufficiently sustainable trajectory and forecasts for 2010 suggest debt levels of 80%. If policies do not change, he said, then debt would reach 100% by 2015.
On 3 November 2009, the European Commission will publish its autumn economic forecast for 2010 and 2011, along with a report in October on the sustainability of long-term public finance. The debate over exit strategies could continue until the end of the year and be reflected in the Stability and Convergence Programmes to be presented to the Commission by the Member States in January 2010.
The ministers agreed that the budget consolidation strategies, which will have to be increased to the equivalent of more than 0.5% of GDP, will have to be accompanied by structural reform. Eurozone growth potential stood at between 2% and 2.5% before the economic crisis, but it now only 1.5% of GDP for the next few years (at current policies), explained Juncker. Describing 1.5% as far too low a level of growth to finance future challenges like the ageing of the population, he called for structural policies to be implemented to boost growth alongside the exit strategies. Almunia said many ministers agreed about the connection between structural reform and budget surveillance. He identified three areas where structural policies were required: - improving the way the financial markets operate; - reforming labour markets through adult education, increasing the retirement age and tackling long-term unemployment; and - introducing productivity-boosting measures like implementing the Services Directive, investing in network industries and investing in research. Trichet said that structural reform was essential, stressing its connection with budget policy.
Should there be coordination of withdrawal of state recovery measures and monetary measures taken by the central banks? Trichet said that there was constant communication among the banks and politicians but coordination in advance was impossible because this would clash with the EU Treaty articles setting out the ECB's powers. Juncker insisted that the ECB was independent, while Almunia added that coordination had to take place between Member States' budget authorities and, if such coordination existed, it would help central banks to decide on the exceptional monetary measures they have introduced. (M.B. trans fl)