Local view for "http://purl.org/linkedpolitics/eu/plenary/2002-10-21-Speech-1-024"
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"en.20021021.4.1-024"2
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".
Mr President, I would like to say firstly that this is a very appropriate time to discuss the framework for fiscal policy within our Economic and Monetary Union.
In the case of Portugal, last week the Commission took a series of important decisions in relation to the excessive deficit procedure and, in our opinion to the Council, we concluded that such a deficit exists in Portugal. There are indications that Germany will exceed 3% deficit in terms of GDP. In France, the deficits in question are dangerously close to 3% and no significant change is expected next year. In Italy, leaving aside the significant departure from the objectives set, the apparent interruption in the reduction of the still very high levels of debt is cause for concern. If the official notifications or data in the possession of the Commission confirm those perspectives, as we agreed in the Amsterdam Declaration, the Commission will apply the provisions of the Treaty.
These are the comments I wanted to make on behalf of the Commission on the economic situation and the budgetary forecasts. I am delighted to share them with you, as representatives of the European citizens, as we have done on previous occasions and of course I am happy to reply to any of your questions or concerns.
I share President Prodi’s conviction that the Stability and Growth Pact is an essential regulatory framework within the Union’s institutional system, which provides the Member States with rigorous but flexible rules so that the Union can confront the challenges in store in the short, medium and long terms.
Over the last four years, the Commission has reiterated that respect for the medium-term budgetary balance rule is the best way for fiscal policy to play its stabilising role within the economic cycle. Of course, we must place more emphasis on cyclically adjusted balances when we analyse fiscal positions, and this is the approach our work has been taking. By acting in this way, it will be easier to prevent expansive fiscal policies when the economy’s growth is strong and therefore we will be able to implement non-restrictive fiscal policies in periods of low growth.
The Pact has also provided us with an appropriate framework to confront the challenges of fiscal policy in the medium term. We all agree that tax and spending reforms are essential in order to increase potential growth in the Union, and the Commission has stressed that a correct interpretation of the rules of the Pact provides an appropriate reference for assessing whether these reforms really improve the quality of public finances.
Finally, the Pact has also demonstrated that it is able to incorporate our long-term challenges, especially those relating to the ageing of the population. A majority of Member States are now in a good position to allow fiscal policy to play an anticyclical role in the current economic situation, in which the forecasts suggest a slower growth than that foreseen at the beginning of the year. The average growth in the eurozone in 2002 will be less than 2% and next year we hope to achieve average potential growth.
In this economic situation, the unexpectedly low growth can be explained, only in part, by the deviation from the budgetary objectives set at the beginning of the year. In some countries, excessively optimistic forecasts of revenue and expenditure trends have had an influence, but also certain deviations from the intended policies. Consequently, this year the budgetary deficits in the zone will be equivalent to more than 2% of GDP, instead of the 0.9% forecast.
In accordance with this thinking, and in accordance with the vision of the Pact which I have just described, President Prodi and myself presented a strategy on how to confront the current budgetary challenges at the end of September. In order to improve the implementation of the Pact and at the same time take account of the complexity of economic reality, we proposed a strategy based on four points: firstly, the deficit limit of 3% of GDP is, and will continue to be, obligatory, and any violation of that threshold will require corrective measures on the part of the Member States concerned; secondly, the objective established by the Pact of a budgetary situation close to the balance of the surplus in the medium term, as well as adjustments aimed at the same thing, must be interpreted in terms of an adjustment of the cycle; thirdly, the countries that have not yet achieved the objective of a budget close to balance must achieve a reduction of their structural deficits of half a point of GDP per year, as a minimum; and, finally, in years of strong growth, any procyclical flexibilisation of the budgets, which may lead to non-compliance with the rule of budgetary balance, must be considered a violation of the provisions of the Pact.
These four principles strengthen the application of the Pact and explicitly incorporate the effects of cyclical development into budgetary monitoring. I am pleased that two weeks ago, in Luxembourg, the Ministers of the Eurogroup adopted a similar position and supported this proposal. Except for France, all the countries, including those in a situation of deficit, have accepted this approach and are making efforts to implement it from 2003.
The budgetary situation is particularly difficult in four countries which were not able to consolidate their public finances during the period of strong growth: Portugal, Germany, France and Italy. The deficits in some of these countries are dangerously close to, if not above, 3%. I am aware that an adjustment is required in these countries in order to achieve a situation of substantial budgetary balance, but I also believe that carrying out this adjustment is crucial so that each country can create sufficient room for manoeuvre for the automatic stabilisers to operate fully."@en1
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