Public Affairs Networking
14/01 New flexibility in Growth and Stability Pact?

Media widely comment on the Commission’s new flexibility within the Growth and Stability Pact. Under the new rules, a “temporary” deviation from savings measures will be permissible; budget consolidation will be given more time if “significant structural reforms” are introduced. Because this is a sensitive matter in Berlin, The Hague, Helsinki and Vienna, where relaxation is strongly opposed, Vice President Valdis Dombrovkis and Commissioner Pierre Moscovici emphasised that the Stability Pact itself remains unchanged, the Dutch press comments.

The FT, the WSJE as well as several other media immediately linked this announcement to Italy and France, as several of the provisions could be used to provide waivers to Rome and Paris when their cases are ruled on by Brussels. VP Dombrovskis and Commissioner Moscovici granted several interviews to Italian media. Both stressed the need for Italy to present new structural reforms. In an interview with Il Messaggero, Mr Dombrovskis said Italy can now benefit from the new flexibility, but must present a new plan of structural reforms “as soon as possible“. Italy has “relatively limited” room for manoeuvre, because it is already close to the 3% deficit-to-GDP ceiling.

Regarding yesterday’s vote by the College of Commissioners,Handelsblatt notes that the 16 page-long message by VP Dombrovskis and Commissioner Moscovici was made available only Tuesday morning, “angering” several of their colleagues. Commissioner Oettinger objected to the new measures. La Repubblica’s Andrea Bonanni also points out that Mr Oettinger disagreed with the new guidelines, but the Commission voted the flexibility clause by majority.

Meanwhile, Gregor Peter Schmitz reports for Spiegel Online that the Federal Government is concerned about these latest announcements on the SGP. Chairperson of the CDU/CSU parliamentary group in the EP Herbert Reul warned that it sends a “highly dangerous signal” to allow for more debt. In their comments on the new rules, journalists ponder whether they constitute a real change. FAZ’s Werner Mussler says the new “flexibility” is no substantial change.

What really counts, writes Mr Mussler, will be the EC’s decision on France’s and Italy’s budget in the spring. However, Ruth Berschens and Donata Riedel report in Handelsblatt that the Juncker Commission appears to be changing course, softening the Stability and Growth Pact. Il Sole’s Adriana Cerretelli and Corriere’s Luigi Offeddu speak of a real change. Adriana Cerretelli welcomes the EC’s new flexibility guidelines, as a “more balanced” way of conducting Europe’s economic policy. “Everything” (or “almost” everything) about the Pact is changing.

This “miraculous balancing act” will probably spare Italy and France any “excessively punitive” treatment in March. Luigi Offeddu claims that Jean-Claude Juncker is giving different messages to different countries, in order to “reassure” each country. Much has changed and is changing, especially on flexibility. The Stability and Growth Pact still exists, but could be left to “(almost) free interpretation“. In other comments, Mujtaba Rahman from the Eurasia Group risk consultancy, is quoted in the FT saying: “While the outcome makes good economic sense for Italy, it is a political fudge for France that will slow reforms and invite tension between Paris, Berlin and Brussels in the future.”  © European Union, 2015


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