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 Milestones

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

Protecting European consumers: Safety Gate efficiently helps take dangerous COVID-19 products off the market

EU trade agreements deliver on growth and jobs, support sustainable development

European Youth Event 2016 – bridge between youth and policy makers

Civilians ‘must never be a target,’ says UN in Afghanistan, amid troubling number of casualties during Ramadan

Digital business is Europe’s best hope to get back to growth

Australia urged to evacuate offshore detainees amid widespread, acute mental distress

Strict alcohol laws which cut intake more than 40 per cent in Russia, linked to historically high life expectancy

Unemployment and exclusion brings EU cities to boiling point

Cyber-Risk Assessments: the vaccine for companies in the Fourth Industrial Revolution

Why the global trade of chemicals is key to COVID-19 recovery

These are the world’s best universities by subject

ISIS fighters fleeing Mosul for Syria can topple Assad. Why did the US now decide to uproot them from Iraq?

If we want to solve climate change, water governance is our blueprint

EU revengefully shows no mercy to Cameron by demanding a fast and sloppy Brexit now

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

The EU Parliament sidesteps the real issues about banks, while the US target the Eurozone lenders

These scientists are using sound waves to filter plastic fibres from washing machine wastewater

State aid: Commission approves € 1.6 billion Polish scheme to compensate companies for damages suffered due to coronavirus outbreak and provide liquidity support

How climate change can be addressed through executive compensation

North Korea missile tests ‘deeply troubling’: senior UN official

A Young student assesses the Programme for International Student Assessment (PISA)

How we planted more than 5,000 trees during the COVID-19 pandemic

Draghi cuts the Gordian knot of the Banking Union

‘Democratic aspirations of the Sudanese people’ must be met urges Guterres, following military removal of al-Bashir from power

5G security: Member States report on progress on implementing the EU toolbox and strengthening safety measures

These are the ‘positive’ tipping points that could slow global warming

EU Budget: A Reform Support Programme and an Investment Stabilisation Function to strengthen Europe’s Economic and Monetary Union

African cooperation on peace ‘increasingly strong’, Security Council told

Why the Greeks forgave Tsipras’ pirouettes around austerity and voted again for SYRIZA

Who can compel Wallonia to unlock CETA, the EU-Canada free trade pack?

EU adopts €55 million support package for Syrian refugees and local communities in Jordan and Lebanon to mitigate coronavirus pandemic

Eurobarometer survey: Majority of EU citizens positive about international trade

Social, cultural diversity ‘an enormous richness, not a threat’ Guterres declares calling on investment for a harmonious future

Plastic waste from Western countries is poisoning Indonesia

EU at UNGA 76: working together to address global challenges

Atomic agency cites concerns over Iran testing sites, offers COVID-19 assistance

EU-China Leaders’ meeting: Delivering results by standing firm on EU interests and values

ILO’s Bureau for Employers´Activities to publish new study on women in business and management

Yemen: ‘A great first step’ UN declares as aid team accesses grain silo which can feed millions

Kids who live in the countryside have better motor skills, a study in Finland has found

Taxation: Commission refers Poland to Court for failing to remove certain tax exemptions on the use of energy products by highly polluting businesses

This project is using AI and drones to track and protect great white sharks

The global issue of migration in 2017

High anxiety calls for innovation in digital mental health

An alternative to the future of antimicrobial therapy

IMF: How To Deal With Failed Banks

World’s most powerful tidal turbine pumps out greener electricity in Scotland

Coronavirus fears may have driven over 300,000 UK smokers to quit

On the Global Day of Parents, UNICEF is urging support for parents to give children ‘the best start in life’

The dangers of data: why the numbers never tell the full story

COVID-19 shows why we must build trust in digital financial services

Can a Bavarian Oktoberfest beer indulger bring down the Berlin government?

Combatting antisemitism requires ‘solidarity in the face of hatred’, says UN chief

EU’s new sanctions on Russia into force “in the next few days”: strength, weakness or strategy?

EU to set up new European Partnerships and invest nearly €10 billion for the green and digital transition

Courage of terrorism survivors underlines ‘urgency’ of UN Investigative Team’s work in Iraq

Women-Friendly Spaces for Rohingya refugees: A place for protection and care

Plans to keep EU budget funding in 2020 in the event of a no-deal Brexit

Most US students aren’t learning about climate change. Parents and teachers think they should

GSMA Mobile World Congress Americas

More Stings?

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

%d bloggers like this: