EU commission eases up on budget rules for member states

MEPs not entirely convinced by commission's latest communication on the stability and growth pact (SGP).

By Julie Levy-Abegnoli

14 Jan 2015

The communication is intended as a set of guidelines "to encourage structural reforms and investment", and offers up details as to how Juncker will enforce EU economic rules.

The stability and growth pact has existed since 1997, and indicates how Europe should proceed in terms of economic governance. 

It is this pact that says that, in theory, member states' budget deficit should not exceed three per cent of their GDP, while their public debt should be no more than 60 per cent of their GDP.

According to the commission, countries that do not abide by these rules "may ultimately face sanctions". So far none have been applied, although states such as France and Belgium have received repeated warnings and have until March to take action.

So perhaps these countries will be pleased to know that from now on, "the positive fiscal impact of structural reforms" will be taken into account when checking that the rules are being adequately followed.

"We see a change in the commission's approach to implementing the fiscal rules - for the first time we can reconcile fiscal discipline with growth" - Gianni Pittella

Additionally, any contributions made by member states to the European fund for strategic investments (EFSI) - which is at the core of Juncker's €315bn investment plan - will not be counted when assessing whether or not countries are respecting the rules.

Essentially, if a state's budget deficit exceeds three per cent of its GDP but this state has fed money into the EFSI, it will not run the risk of sanctions.

Member states will also be allowed to deviate from the rules in order to boost national expenditure "on projects co-funded by the EU".

S&D group president Gianni Pittella welcomed the announcement, explaining, "we see a change in the commission's approach to implementing the fiscal rules - for the first time we can reconcile fiscal discipline with growth".

He added that he was pleased that "Europe is moving away from blind austerity", and encouraged countries to "use this new room for manoeuvre to invest".

Pervenche Berès, who will be responsible for drafting parliament's report on economic governance, praised the college for "taking the economic situation in Europe seriously", but warned that "this is not yet the end of the tunnel".

She said, "we need to go further to achieve a strategy for growth and jobs from the current discussions on the deepening of the economic and monetary union".

However, other parliamentarians were not as welcoming of the new guidelines.

"While the Greens are in favour of recycling, taking from Peter to pay Paul will not amount to new investment and is unlikely to convince the private sector to join in" - Philippe Lamberts

ALDE group president Guy Verhofstadt warned, "if we are to exit the crisis, we need much more commitment and a more united Europe".

Greens/EFA group co-president Philippe Lamberts dismissed them as "a mere repackaging exercise", saying, "while the Greens are in favour of recycling, taking from Peter to pay Paul will not amount to new investment and is unlikely to convince the private sector to join in".

Co-president Rebecca Harms criticised the plans as "wishful thinking", and instead called for "a green energy union - based on energy efficiency and renewable energy - to reorient our economy and to stimulate social and green innovation".

Meanwhile, Fabio De Masi, GUE/NGL shadow rapporteur on the investment plan, described Juncker's proposal as "just voodoo".

He urged Europe to "get rid of tax havens and avoid tax evasion", and added that "we need an investment programme of €260bn a year".

The commission said that since it is not proposing any changes to existing rules, the guidelines will be effective immediately, as there is no legislation to be passed.

 

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