It is well known that France and Germany, the engines of integration, are serial violators of the Stability and Growth Pact. In recent years, they have been joined by seven other member states including the UK. The inability of member states to meet the requirements of the pact and of the Commission to punish violators credibly has resulted in members states negotiating a reformed Stability and Growth Pact that is expected to be approved at the next European Summit. The deal keeps the 3% deficit/GDP and 60% debt/GDP criteria in place, but increases the number of exceptions. Some of the major changes, according to Euroactiv, include:
• No enforcement proceeding will be launched against a member state experiencing negative growth (previously the exception was for countries in a recession of 2% negative growth).
• Leeway will be given for spending on efforts to "foster international solidarity and to achieving European policy goals."
• Countries will have two years (previously one) to correct an excessive deficit.
Euroactiv also summarized the positions many analysts are taking on the new changes. Governments seem to be glad to have escaped any economic consequences to their deficit spending, while business leaders believe the reforms threatens to undermine the pact altogether. In the latter camp, they report:
Analyst Charles Wyplosz says the bigger countries got what that they wanted and the pact has been further politicised and is unlikely to "bite" at least in the case of the big countries …
In a press statement the Governing Council of the European Central Bank expressed serious concern about the proposed changes to the pact. It stressed the importance of making sure that changes in the corrective arm of the pact do not undermine confidence in the fiscal framework of the EU and the sustainability of public finances in eurozone countries …
EPP-ED Group Chairman Hans-Gert Pöttering calls the deal reached by EU finance ministers as a "regrettable backward step for European currency stability" …
Paul Skehan, deputy secretary general of the European Association of Chambers of Commerce and Industry (Eurochambres), criticised the deal: "The review of the pact should be based on economic objectives and principles. Instead, political considerations seem to be the decisive factors. A lite-pact will not restore credibility in the pact, Europe and its institutions."
The German BDI industry association warned that the pact would soon become "toothless".
I tend to agree with these analysts. If the rules are changed to benefit those who break them, the EU loses all credibility in the enforcement of commitments between the member states. The pact should not have been politicized.
• No enforcement proceeding will be launched against a member state experiencing negative growth (previously the exception was for countries in a recession of 2% negative growth).
• Leeway will be given for spending on efforts to "foster international solidarity and to achieving European policy goals."
• Countries will have two years (previously one) to correct an excessive deficit.
Euroactiv also summarized the positions many analysts are taking on the new changes. Governments seem to be glad to have escaped any economic consequences to their deficit spending, while business leaders believe the reforms threatens to undermine the pact altogether. In the latter camp, they report:
Analyst Charles Wyplosz says the bigger countries got what that they wanted and the pact has been further politicised and is unlikely to "bite" at least in the case of the big countries …
In a press statement the Governing Council of the European Central Bank expressed serious concern about the proposed changes to the pact. It stressed the importance of making sure that changes in the corrective arm of the pact do not undermine confidence in the fiscal framework of the EU and the sustainability of public finances in eurozone countries …
EPP-ED Group Chairman Hans-Gert Pöttering calls the deal reached by EU finance ministers as a "regrettable backward step for European currency stability" …
Paul Skehan, deputy secretary general of the European Association of Chambers of Commerce and Industry (Eurochambres), criticised the deal: "The review of the pact should be based on economic objectives and principles. Instead, political considerations seem to be the decisive factors. A lite-pact will not restore credibility in the pact, Europe and its institutions."
The German BDI industry association warned that the pact would soon become "toothless".
I tend to agree with these analysts. If the rules are changed to benefit those who break them, the EU loses all credibility in the enforcement of commitments between the member states. The pact should not have been politicized.
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