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.

 

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

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

EU Parliament: The surplus countries must support growth

The world is too complacent about epidemics. Here’s how to change

3 vital steps to a new gender equality playbook

From low-earth orbit, ‘envoys’ of humanity join UN space forum

ECB to play down IMF’s alarms for deflation danger in the EU

Colombia: Santos thanks the EU for its support to the peace process

As Saudi women take the wheel, UN chief hopes end of driving ban creates more opportunities for kingdom’s women and girls

Aid teams respond to escalating southwest Syria conflict: 750,000 civilians are at risk

Here’s what keeps CEOs awake at night (and why it might be bad news for your next job)

Free trade agreement between EU and India?

EU unveils plan to accelerate Capital Markets Union ahead of London’s departure from the bloc

The developing countries keep the world going

Safe drinking water, sanitation, are ‘basic human rights’: new UN Water Development report

Parliament wants to suspend EU accession negotiations with Turkey

AIESEC @ European Business Summit 2014: European Youth, Change Now Patiently

Rise in number of children killed, maimed and recruited in conflict: UN report

How to tap the talents of refugees – one student at a time

Four ways innovation can help to beat heart disease

Brazil’s hopeless future of science

Feeding families remains complex task in war-torn Syria – UN relief agency

Google strongly rejects EU antitrust charges and now gets ready for the worst to come

‘Global trust’ declining, ‘our world needs stepped-up global leadership’

G20 LIVE: “United States and Turkey stand in solidarity with France and its people in handing the perpetrators of this crime and bringing them to justice”, US President Barack Obama underlines from G20 in Antalya Turkey

MEPs call for decisive action to fight inequalities in the EU

The global issue of migration in 2017

What can the private sector do to alleviate the refugee crisis?

Brexit update: Will Theresa May’s last-minute desperate efforts procrastinate Brexit?

Obese people more likely to smoke, says new gene research: WHO

This Dutch company has devised an innovative way to deal with food waste

UN chief welcomes prisoner exchange between the Russia and Ukraine

UN emergency relief fund has ‘never been more critical’: Guterres

The US will impose tariffs on Mexico, says President Trump

How to beat gender stereotypes: learn, speak up and react

Hunger in Yemen: WFP considers aid suspension in face of repeated interference by some Houthi leaders

Depression is the no. 1 cause of ill health and disability worldwide

Multilateralism must weather ‘challenges of today and tomorrow’ Guterres tells Paris Peace Forum

Facebook and Google to treat Europe as the 51st State of the USA

Why economic growth depends on closing the interview gap

“For my children Italy will be an innovation lab and not a museum”; the Sting reports live from World Economic Forum 2015 in Davos

Four years on and half a billion dollars later – Tax Inspectors Without Borders

The world’s coastal cities are going under. Here’s how some are fighting back

Gender Equality Index 2019: Still far from the finish line

Mergers: Commission approves Varta AG’s acquisition of Energizer’s divestment business, subject to conditions

The Fourth Industrial Revolution is redefining the economy as we know it

Assembly of European Regions @ European Business Summit 2014: Made in Europe – Made of Regions

No barriers to free flow of non-personal data in the EU

Trump beats Clinton but Americans will learn the hard way that the US can’t change with an election

More beehives and beekeepers thanks to EU support

Alarming number of Ebola deaths in DRC a ‘rallying cry’ to scale up treatment

This is where people work the longest – and shortest – hours

UN chief sends condolences to families of Malawi flood victims

How to get ageing populations to invest in their health

MEPs list conditions for new EU-Azerbaijan deal

Top UN court rules it has jurisdiction to hear Iranian claim against US over frozen assets

Netherlands: Budget MEPs back €1.2m in job-search aid for 450 redundant workers

Crop yields are up in Syria, but higher prices still cause major strain: new UN report

Factories are no longer the sure route to prosperity. Here’s why

Spending another 3 billion euros on Turkey feels better than admitting EU’s failure

Canada leading the way on women’s inclusion and empowerment, says OECD

Irish Presidency: Not a euro more for EU budgets

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