EU Parliament: The surplus countries must support growth

European Parliament. Othmar Karas is chairing the plenary session in Strasbourg, Week 43, 2013. (EP Audiovisual Services, 23/10/2013).

During the last two days the European Parliament intervened very actively, not only in the economic and budgetary policies of EU proper, but also in the way the 28 member states are formulating their fundamental financial choices, while drafting the 2014 government budgets. For one thing, this morning the plenary House is debating and presumably is expected to pass an amending Budget of €2.7 billion, raising by an equal amount EU’s spending capacity for this year.

By the same token, legislators yesterday, with a vote in the plenary, reversed the Council’s proposed cuts in research and employment expenditure in the 2014 EU budget. Last but not least, yesterday also, the Parliament’s plenary strongly criticised the Economic and budgetary policies of EU countries for not adequately addressing growth, employment and investment issues. This is under the so-called new European Semester procedure, designed to do just that. Let’s take one thing at a time.

Covering urgent needs

Starting from the urgent need to cover the financial gap in the European Commission’s cash flow this year, the MEPs approved last Tuesday evening an amendment, which would add €2.7bn to the 2013 EU budget. This was needed after it became evident that the Union’s revenue from import duties collected at the EU’s external borders, proved far lower than was forecast by Eurostat (and endorsed by the EU member states) and thus had to be replaced, by a higher Gross National Income direct contribution from member states. According to a recent statement by Commission President Manuel Barroso, “the Commission will not be in a position to pay legitimate invoices from mid-November onwards, unless this amending budget is accepted”.

The prerequisites

However, this development doesn’t exhaust the confrontation between the legislative and the Council over the 2013 budget. The Parliament is waiting for the Council to approve an amendment of the 2013 budget (N° 8 of €3.9bn), as the European Sting reported on 3 October. This amount is needed to cover this year’s and 2012 budgetary shortfalls and the Council’s approval of it is a prerequisite for Parliament to give its blessing, to the EU’s long-run budget for 2014-2020.

Now passing to next year’s EU budget, the European Parliament didn’t back off yesterday from the lines it drew last June. On that occasion, the legislative willy-nilly had endorsed the 2014 Budget lines the Commission had proposed, under the pressure of the generalised austere mentality reigning all over the EU. This proposal provided for fewer resources next year than in 2013. As a matter of fact, the Parliament accepted a 2014 budget of €142.6 billion in commitments and €136.1 billion in payments.

These amounts are down on this year’s budget by €8.1 billion (commitments) and €4.3 billion (payments). The Council had further reduced the Commission’s budget proposal by €240 million in commitments and €1.06 billion in payments, to €141.8 billion and €134.8 billion respectively. According to a Press release issued by the Parliament “In areas that MEPs believe are vital to boost the economy, such as the digital agenda, research, entrepreneurship and (youth) employment measures, the Parliament recommends to reverse the €629 million payment cuts proposed by the Council and to top up the budget with an extra €34 million”.

Last but not least, the EU Parliament had a lot to say about the draft budgets of the 28 member states for 2014. Under the European Semester procedure now in force, as institutionalised by the ‘six pack’ regulations, member states from now on must get clearance from Brussels for their next year budgets. To this effect, they submitted their draft budgets for 2014 to the European Commission and the Parliament.

In view of that, the Parliament in its annual resolution included warnings and requests over the process whereby EU member states coordinate their budgetary and economic policies. This resolution drafted by Elisa Ferreira (S&D, PT), calls for “stricter criteria to ensure that economies converge and underlined once more that democratic accountability of the process is not up to scratch”.

Genuine convergence

This resolution also calls for “genuine convergence, inter alia by creating a Competitiveness and Convergence Instrument which would supply EU countries with funds to cushion the short-term negative effects of economic reforms”. It adds that “The ‘surplus’ countries should make more efforts to beat the crisis and not leave that solely up to those in fiscal difficulties”. By the way, this is exactly what the Commission said at the beginning of this week, in a paper entitled “Fiscal consolidations and spillovers in the Euro area periphery and core”, written by Jan in’t Veld, an economist of the Directorate-General for Economic and Financial Affairs of the European Commission. The European Sting reported on that yesterday.

All in all, from what is evident from the above Parliament recommendations, they broadly coincide with what the Commission proposes about the EU budgets and the economy. If this convergence continues it will be rather difficult for the Council (the member states) to oppose it.