One of the more controversial actions taken by the Juncker Commission in its still-short life was January’s move to make the EU’s crisis-era budget rules more “flexible,” an announcement many took as a signal it was preparing to let both Italy and France off the hook for their recent fiscal transgressions. Which it ultimately did.
According to Commission officials, the so-called “flexibility communication” caused ructions among the 28 commissioners both because of its substance and the process by which it was agreed: the college was only allowed to see a hard copy of the highly-technical document for about a half hour before it was taken away, and then presented for adoption later in the day.
Among those who were angered by the way it was forced through the college over the complaints of some of the Commission’s budget hawks was Chancellor Angela Merkel who, according to our friends and rivals at the German weekly Der Spiegel (no relation), complained to Juncker that “her commissioner” – German Günther Oetttinger – had only received the document a few hours before it was to be approved. “Why ‘your’ commissioner?” Juncker reportedly replied coolly. “That’s my commissioner.”
Now it seems that Berlin is not the only place where objections are being raised about some of the decisions taken in the “flexibility communication”. According to a leaked opinion by the European Council’s legal service – which Brussels Blog got its hands on and has posted here – last month, lawyers on the other side of Rue de la Loi appear to have decided a central part of the new guidelines might be illegal. Read more
Having trouble following the fight over the EU’s budget rules? You’re not alone. They are fiendishly complicated, particularly since nearly every eurozone country is at risk of violating a different part of them.
Is your deficit over 3 per cent of economic output? Then you’re in the “excessive deficit procedure”. Is your deficit under 3 per cent but at risk of going over? Then you’re in the “preventative arm”. What if your deficit is under 3 per cent, but your national debt is over 60 per cent of gross domestic product? Well, you can still be in an “excessive deficit procedure” if you don’t cut the debt fast enough.
There are so many iterations that the European Commission has an entire 115-page “vade mecum” – fancy Latin for “guidebook” – for those trying to figure out how they work.
The complexity of the rules has made it particularly difficult to judge the new Italian budget, submitted – along with all other eurozone countries, save bailout countries Greece and Cyprus – to the European Commission on Wednesday. Read more
The first 11 years of the euro have exposed several flaws in the design of Europe’s monetary union. One is the fact that, contrary to expectations, the experience of sharing a common currency with advanced, northern European economies did not spur but held back structural reform in weaker, southern member-states. Another was the ineffectiveness of the stability and growth pact, the eurozone’s so-called fiscal rulebook. In a nutshell, too many governments ran up large budget deficits and didn’t bother to cut public debt when they felt like it – and this, by the way, includes Germany, the self-styled paragon of fiscal discipline, under former chancellor Gerhard Schröder. Read more
Greece’s fiscal emergency is a most mystifying crisis. At one level, it is the most serious test of the eurozone’s unity since the launch of the euro in 1999. Unless correctly handled, the problem with Greece’s public finances could shake the foundations of Europe’s monetary union.
At another level, however, Greece itself seems to be getting off remarkably lightly. Germany suffered a 5 per cent slump in gross domestic product last year; Greece is expected to have suffered a fall of about 1.1 per cent. Spain has a 19 per cent unemployment rate; Greece’s rate is only 9 per cent. The Irish government is imposing extreme austerity measures on its citizens to protect Ireland’s eurozone membership; Greece’s government is, so far, doing nothing of the sort. No wonder Greece’s 15 eurozone partners, the European Commission and the European Central Bank are furious with the political classes in Athens. Read more