The Eurogroup protects Germany and blames others

From left to right, in the foreground: Pierre Moscovici, French Minister of Finance, Jeroen Dijsselbloem, President of the Eurogroup. (Council of the European Union photographic library, 22/11/2013).

From left to right, in the foreground: Pierre Moscovici, French Minister of Finance, Jeroen Dijsselbloem, President of the Eurogroup. (Council of the European Union photographic library, 22/11/2013).

Last week in Brussels, an unseen before procedure took place, during last Friday’s Eurogroup of the 17 euro area member states council of Finance ministers. The 17 politicians assessed the Commission‘s opinions on member states’ draft budgets, ahead of those draft budgetary exercises been discussed in national Parliaments. This is the EU’s ‘brave’ new economic governance procedure, along the lines provided by the ‘Two Pack’ regulations, imposing a new regime in Eurozone’s fiscal reality.

The ‘Two-Pack‘ regulations entered into force on 30 May 2013 covering all 17 euro area Member States. The new strict fiscal rules for euro area countries are meant to reinforce the Stability and Growth Pact (SGP), which in its initial form failed to restrict budget deficits and public debt below 3% and 60% of GDP, respectively. The SGP framework was launched together with the introduction of the euro and was supposed to offer a solid fiscal base for the new currency. It failed to deliver results and the euro area debt crisis of 2009 broke out. Consequently the EU had to introduce new checks, controls and penalties to oblige member states to comply with the rules. The task to assess the adaptation of national budgets in the new regulatory environment has been bestowed to the European Commission.

The Commission’s assessments

In this context, the 17 Eurozone member states submitted by 15 October their draft 2014 budgets to the Commission for appraisal. Last Friday the Eurogroup gathered to discuss the relevant opinions issued by the Commission. To this effect the draft 2014 budgets of 13 euro area member states were on the table. The other four countries, namely Greece, Ireland, Portugal and Cyprus, are under troika (EC, ECB, IMF) macroeconomic austerity programmes and are monitored through other procedures. The troika of the European Commission, the European Central Bank and the International Monetary Fund is overlooking the restructuring of those four economies and at the same time provides the necessary funding to cover their obligations.

Returning now to the 13 member states, the draft budgets of which were under scrutiny by the Commission during the past four weeks, all of them passed the test and none was judged as non-compliant. However according to Eurogroup President Jeroen Dijsselbloem, minister for Finance of Holland, the Eurogroup “dedicated most of its time this afternoon in the meeting to those Member States that were found not fully compliant and asked ministers to present their budgetary strategy in reaction…We therefore invited those Member States to take – as appropriate – additional consolidation measures within their national budgetary process, or in parallel. These Member States are in particular Spain, Italy, Malta and Finland”.

Issuing orders

The Eurogroup also commented on some other member states’ draft budgets, issuing recommendations with varying degrees of severity. Olli Rehn, Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro had a special comment to make on France. He said “In the case of France, given its importance as the second economy of the euro area, I very much hope that next year will also see an acceleration of economic reforms to lift sustainable growth and job creation, because that is what the French people are expecting”. It must be noted that the Eurogroup has accorded to France a two year deadline extension to bring its fiscal deficit below the 3% benchmark by 2015.

No comment was uttered however about Germany’s excess trade surpluses. On many occasions during the past few months the European Commission has criticised Germany for its excess trade surpluses. The ECOFIN council had observed once that “In the context of the 2013 European Semester, the Council of Ministers recommended to Germany to sustain conditions that enable wage growth to support domestic demand, for example by reducing high taxes and social security contributions, especially for low-wage earners”.

Nothing on Germany

These recommendations came after it was confirmed that Germany has produced external imbalances during the past years. According to the rules of the Macroeconomic Imbalance Procedure a 3 year average of the current account balance as a percentage of GDP, should be within the indicative thresholds of +6% and – 4%. The Commission noted that an “In-depth reviews will also be prepared for Germany and Luxembourg in order to better scrutinise their external positions and analyse internal developments, and conclude whether either of these countries is experiencing imbalances…However, Germany has made no progress in addressing the structural part of the fiscal recommendations issued by the Council in the context of the 2013 European Semester”.

Despite all that, not a word was pronounced about German imbalances during last Friday’s Eurogroup. It seems that Germany is much stronger in the Eurogroup of the 17 than in the ECOFIN of the 28 ministers of Finance. As noted above the ECOFIN has recommended to Germany to sustain conditions that enable wage growth to support domestic demand“, but the Eurogroup didn’t even repeat that.

Germany has frozen its incomes policies for at least five years, in order to increase its competitiveness. By doing this however it indirectly exploited its trade partners, mainly in Eurozone. More than once the IMF and the Commission have asked Germany to do more to help Eurozone start growing again, by taking measures to enhance its internal demand through income and real investment increases. In this way this country can help its trading partners export more. Berlin has answered bluntly to this criticism, boasting about the high quality and the competitiveness of its cars and machinery. Unfortunately, last Friday’s Eurogroup didn’t find a word to tell about all that.

 

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

Estonia is making public transport free

Sudan: Amidst deaths, injuries, imprisonments, UNICEF stresses children’s protection ‘at all times’

‘Laser-sharp focus’ needed to achieve Global Goals by 2030, UN political forum told

Why exporters need to mind the trade finance gap

6 ways least developed countries can participate in the 4IR

Tax revenues continue increasing as the tax mix shifts further towards corporate and consumption taxes

Parliament leads the way on first set of EU rules for Artificial Intelligence

$683 million appeal to deliver reproductive health services, where they’re most needed

Iraqis paying an ‘unthinkable price’ to be heard, UN envoy tells politicians in Baghdad

Women’s rights face global pushback from conservativism, fundamentalism – UN experts warn

“What a Wonderful World”: the unsettled relationship between Climate Change and Human Health

Trailing the US-EU economic confrontation

Coronavirus makes inequality a public health issue

Seven trends shaping the future of the mining and metals industry

EU confronts environmental threats as global leaders attempt to revive the global sentiment at NYC climate week

China’s New Normal and Its Relevance to the EU

Defence: European Commission paves the way for first joint industrial projects under EU budget

Why support for Latin America’s early tech hubs is vital for the region

Draghi hands over to banks €77.7 billion more

EU takes again positive action on migration crisis while Turkey asks for dear favors in exchange for cooperation

Chart of the day: These countries have seen the biggest falls in extreme poverty

Coal addiction ‘must be overcome’ to ease climate change, UN chief says in Bangkok

Libya: Thousands seek shelter in health clinics from Tripoli fighting, UN warns

Endocrine disruptors: A strategy for the future that protects EU citizens and the environment

DR Congo elections: ‘historic opportunity’ for ‘peaceful transfer of power’ says Security Council

Turkey presents a new strategy for EU accession but foreign policy could be the lucky card

Resolving banks with depositors’ money?

Chart of the day: When do young Europeans leave home?

UN unveils global influenza strategy to prevent ‘real’ threat of pandemic

Time to be welcome: Youth work and integration of young refugees

5 amazing people fighting to save the oceans

European Investment Advisory Hub sends projects worth €34 billion to European Investment Bank pipeline

European Border and Coast Guard: Council adopts revised regulation

Coronavirus could trigger a hunger pandemic – unless urgent action is taken

#Travelgoals: why Instagram is key to understanding millennial tourism

Long-term EU budget: MEPs slam cuts to culture and education

What the COVID-19 pandemic teaches us about cybersecurity – and how to prepare for the inevitable global cyberattack

EU agricultural production no more a self-sufficiency anchor

UN chief urges peaceful, free and fair elections in Cameroon

Could implants treat people with brain disease? A young scientist explains

Coronavirus update: COVID-19 likely to cost economy $1 trillion during 2020, says UN trade agency

Sea urchins are overwhelming parts of the ocean. Could turning them into sushi be the solution?

Coronavirus: rescEU masks delivered to Spain, Italy and Croatia

UN agriculture chief urges ‘transformative changes’ to how we eat

Survivors of ISIL terror in Iraq want justice, not revenge, says head of UN investigation team

Guterres condemns killing of Bangladeshi peacekeeper in South Sudan, during armed attack on UN convoy

FROM THE FIELD: ‘Hope’ on the horizon as UN Peacekeepers push deep into Mali

Trade Barriers Report: EU continues to open up markets outside Europe in midst of rising protectionism

How and why Mercedes fakes the EU fuel consumption tests

‘We need to stand up now’ for the elderly: urges UN rights expert on World Day

This AI is working with a fleet of drones to help us fight ocean plastic

Force used against protestors in Gaza ‘wholly disproportionate’ says UN human rights chief

Data is the new gold. This is how it can benefit everyone – while harming no one

Can Southeast Asia keep up with growing energy demand?

A Sting Exclusive: EU Commissioner Mimica looks at how the private sector can better deliver for international development

How to outsmart bias when you’re recruiting

Female leaders warn about the erosion of women’s rights

6 surprising side effects of this year’s global heatwave

Switzerland fast-tracks emergency aid for small businesses weathering COVID-19

This New York store is selling Christmas presents for refugees

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