EU economic governance: More exploitation for the weaker countries

French minister of Finance Pierre Moscovici (on the left) and Olli Rehn, Vice-President of the European Commission responsible for economic and monetary affairs, meeting at the Ecofin Council of 15/10/2013. (The Council of the European Union, Photographic Library).

Spanish minister of Finance Luis de Guindos (on the left) and Olli Rehn, Vice-President of the European Commission responsible for economic and monetary affairs, meeting at the Ecofin Council of 15/10/2013. (The Council of the European Union, Photographic Library).

Last Tuesday 15 October was the last day the 28 EU member states, and more so the 18 Eurozone countries, had to submit to the Commission for approval their draft budgets for 2014. It is the first time that the European Union member states and more particularly the euro area countries, before presenting their state budgets for next year to national Parliaments, they need first to secure the green light from the European Commission. The EU’s executive arm is to make sure that those annual fiscal exercises are within the limits set for deficits (3% of the GNP).

The Commission has the right to ask for modifications, if the deficit and debt limits are not respected. Only then the budgets can be legally endorsed by the national legislatures. This is the most important concession of national sovereignty by the EU member states to Brussels authorities. In reality after the Commission’s approval of next years’ fiscal exercise, the national parliamentary procedure for the endorsement of the budget becomes just a bureaucratic and technical process. Of course national Parliaments can change the magnitude of the individual items of the budget, but they must respect the overall deficit limit of 3% of GDP.

Economic governance

This is the new EU economic governance procedure, introduced in the European Union with two sets of regulations, the well know ‘six pack’ and ‘two pack’. Deficit and debt limits are the same for all 28 EU member states. For the euro area countries however there are additional special provisions, enforcing closer monitoring and stricter obligations under the excessive deficit procedure.

However a lot of things in Brussels, including legality, are relative matters depending on what the Commission ‘thinks’ it is legal. The EU’s executive arm usually keeps for itself the last word. This is the famous or rather infamous discretionary power of the Commission. Of course this is not made for ‘personal use’ by Commissioners, but rather for those who have sent them there, the member states. Given that it is also a traditional in Brussels that some countries like Germany, France and Britain are more equal than others, they can make more use of Commission’s discretionary power. The hierarchy of power goes even deeper to medium size member states and the states affiliated to the ‘big ones’.

Naturally the big innovation of EU’s economic governance procedures couldn’t be an exception to the above rule. To this effect the Commission ‘discovered’ that some public ‘investment related’ spending could be forgiven, and not count in the allowed 3% of GNP deficit. Olli Rehn, Vice-President of the European Commission responsible for economic and monetary affairs made this exception official and even gave it the pompous name, of ‘investment close’. He described it very nicely as follows, “productive investment, especially the issue of how public investments which support sustainable growth can be accommodated within our fiscal rules”. Accommodate’, is the usual word used by the Commission, when the ‘bosses’ demand special treatment.

Not all deficits are deficits!

Rehn had more to say on this issue last Tuesday night in Luxembourg, after the meeting of the Ecofin council. In that Press conference he clarified: “In other words, the Commission will take into account public investment plans for productive investments related to co-financing of European projects, under these specific conditions and within the clear limits set by the Stability and Growth Pact, when we assess of Member States’ draft budget plans for 2014”.

As it happens with exceptions, more clarifications are usually needed. To this effect Rehn went on explaining which of those investments/projects will not count in the deficit, stating that “this needs to be focused on co-financed projects with European Structural and Cohesion policy, Communication and the Connecting Europe Facility. These must have a positive, direct and verifiable long-term budgetary effect. These are the keys conditions of the investment clause”. Then he added, ”Today, I clarified to those Ministers who will use this investment clause, so that they are working on the basis of precise and relevant information and they know that they can, in case they fulfil the conditions and they want to move forward on this, they can then apply this investment clause in their budget for 2014”.

This is a very serious matter to be that complicated though. If Rehn can decide almost freely what doesn’t count in the deficit, he can single-handed rewrite all the ‘two pack’ and the ‘six pack’ regulations. Next time might change his mind and add some new exceptions, accommodating more demands by core countries like Germany and France. In this way the phantom of democratic deficit of the European Union rises again and becomes the source of more arbitrary decisions accommodating the powerful.

It is even more disappointing and dangerous that the Berlin and Paris political and economic circles of power are eager to fully exploit this lack of EU’s basic democratic institutions and profit ruthlessly from the non-existent institutional protection of the weak and small member states. This is not though another cause for lamentations for the poor and the weak but rather a fundamental fault in the entire EU edifice, which may cause a its total collapse.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Which EU countries have to correct their economic policies?

EU, Brazil to hold high level Summit in Brasilia

34 million Americans know someone who died after being unable to pay for medical treatment

Draghi’s negative interest rates help Eurozone’s cohesion

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

UN expert condemns new sentence for jailed Venezuelan judge as ‘another instance of reprisal’

Coronavirus (COVID-19) update: Busting the myth by looking at the facts

European Banking Union: no one is perfect

It’s Trump’s anti-globalization and inward-looking rhetoric that perturbs GOP and US

Preventing and resolving conflicts must form ‘backbone’ of collective efforts – UN chief

These are the world’s most fragile states in 2019

Pollinating insects: Commission proposes actions to stop their decline

North Macedonia President, credits dialogue and diplomacy for setting a decades-long ‘name dispute’

Security of 5G networks: EU Member States complete national risk assessments

World is closer than ever to seeing polio disappear for good

Aid stepped up to Syria camp; new arrivals say terrorists blocked their escape

Social Entrepreneurship in the times of the refugee crisis

Europeans show record support for the euro

EU supports recovery and resilience in Nigeria with additional €50 million

This is what happened to CO2 emissions in the EU last year

EU Summit consumed by the banks

Sudan: top UN official demands cessation of violence and rape against civilians by security forces

The European Sting Cookie Policy

Aviation Safety: Commission adopts new EU Air Safety List

Climate change will shrink these economies fastest

3 important lessons from 20 years of working with social entrepreneurs

These photos show some of the world’s smallest things massively magnified

EYE to kick off on Friday: 8000+ young people discussing the future of Europe 1 – 2 June

There is huge talent in the world’s refugee camps. We must realize this overlooked potential

The challenge of maintaining interest in Primary Health Care in medical students

This Central Asian lake is a stark reminder of the impact we have on the planet

Boris ‘single-handed’ threatens mainland Europe; can he afford a no-deal Brexit?

How public transportation provides key lifelines during COVID-19

How start-ups will lead India through the Fourth Industrial Revolution

A comprehensive strategy for Eurozone’s long term growth gains momentum

A free press is ‘cornerstone’ for accountability and ‘speaking truth to power’: Guterres

80 million Chinese people no longer pay income tax

Commuters in these cities spend more than 8 days a year stuck in traffic

War of words in Davos over Eurozone’s inflation/deflation

Syria’s Idlib ‘on the brink’ of a nightmare, humanitarian chiefs warn, launching global solidarity campaign

Greece’s Tsipras: Risking country and Eurozone or securing an extra argument for creditors?

Sochi not far away from Ukraine

Amid COVID-19 constraints, UN women’s commission meets to push gender equality forward

EU: 13 major banks may pay fines 10% of worldwide turnover

More capital and liquidity for the banks

Good grub: why we might be eating insects soon

Fighting for minds of youth in Latvia

‘Counter and reject’ leaders who seek to ‘exploit differences’ between us, urges Guterres at historic mosque in Cairo

Dangerous Trumpism in the Middle East with an anti-European edge

European Commission steps up protection of European intellectual property in global markets

The EU Commission vies to screen Chinese investment in Europe

European Citizens’ Initiative: Commission registers ‘End the Cage Age’ initiative

European Commission and European Investment Fund launch €75 million BlueInvest Fund

Debunked: 5 myths about the future of work

Top envoy to Yemen praises ‘flexibility’ of chief negotiators as new UN mission chief is named

Europe plans to send satellites into space to monitor CO2 emissions

“Decent working conditions for the young health workforce: what are the challenges and can we find solutions?”

Coronavirus (COVID-19): Latest news from Monday’s World Health Organization briefing

Nine children killed or maimed in Afghanistan every day: UN Children’s Fund

Security Union: political agreement on strengthened Schengen Information System

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s