Local view for "http://purl.org/linkedpolitics/eu/plenary/2003-12-03-Speech-3-067"
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"en.20031203.7.3-067"2
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".
Mr President, ladies and gentlemen, thank you for inviting me to discuss with you at this sitting the economic Stability and Growth Pact.
The contents of the statement may be summarised as follows: stability and growth are the fundamental objectives of European economic policy. The Pact constitutes an essential means of implementing that policy. The Pact has been called ‘stupid’. We have shown the opposite, we have shown that the Pact can be interpreted in a flexible, discerning manner. The Pact can be implemented by adapting budgetary discipline in an even more rational manner to positive or negative economic cycles and by encouraging structural reforms aimed at developing growth potential. In these terms, the letter and the spirit of the Pact are not dead; quite the opposite, we have worked in the past, are working now and will continue to work within the framework of the Pact and with the Commission’s support in a cooperative and consensual manner.
In conclusion, we have thus far talked a lot about procedure and said little about the economy. In the growth strategy, as has been said, it is necessary for the Pact to take into account economic cycles and structural reforms: this is necessary, but it is not sufficient. Six months ago, at the start of this six-month presidency, we presented an Action Plan for Growth to this House. The support given to this Plan by Parliament was decisive and now the Plan must be implemented. Other, new development initiatives must follow. The Commission, the governments and the markets have a role to play in the growth strategy, but the European Parliament must also play a role as a decisive driving force: indeed, economic policy is either a policy or it is not.
Allow me to begin by going over the events which led up to the Eurogroup and Ecofin meeting of 24 and 25 November.
During the first half of 2003, at the Commission’s proposal, the Council sent two recommendations in respect of excessive deficits to Germany and France on 21 January and 3 June respectively, calling for the deficits to be reduced below the reference threshold of 3% by the end of 2004. It should be noted that the recommendations were adopted on the basis of assumed progressive economic growth during the year brought about by the elimination of negative factors due to the end of the war in Iraq.
In subsequent months, however, it became clear that the actual progress of the European economy was different, being more negative than expected. Economic growth, lower than that forecast by approximately one percentage point, led to a greater increase in public deficits than expected. The upshot of this was that it was impossible for Germany and France to reduce their deficits below 3% in 2004, as initially requested.
In the second half of 2003, between October and November, the Commission fully and formally acknowledged this new situation and accordingly proposed two new recommendations seeking to defer the deficit reduction to below 3% until 2005. Essentially, it is reasonable to assume that, had it been known at the start of 2003 that the progress of the Euro area economy would not be positive, the recommendations would have stipulated 2005 at the outset as the year during which the deficits had to be brought back into line.
On this basis, both Germany and France took measures to incorporate the substance of the recommendations. As regards Germany, the recommendations have been directly incorporated into the budgetary legislation: for 2004 provision has been made for a structural adjustment of 0.6% of GDP and for 2005 an adjustment of 0.5%, that is to say 1.1% of GDP in total, which is close to that initially requested by the Commission, without prejudice to the reduction below 3% in 2005. As regards France, the recommendations were incorporated first into the budgetary legislation and subsequently by means of other measures: for 2004 provision has been made for an adjustment of 0.8% of GDP and for 2005 an adjustment of 0.6%, that is to say 1.4% of GDP in total, which is close to that requested by the Commission, without prejudice to the reduction below 3% in 2005.
Furthermore, France and Germany have given undertakings to channel any effects of greater growth into deficit reduction, as requested by the Commission. In addition to this, it should be borne in mind that, in 2003, France and Germany set in motion an intense programme of welfare state reforms, which had a decisive, positive impact on the sustainability of public finances. Within the context of the political economy, this is an issue of more than minor importance surrounding the discussion of the Pact which has taken place over the course of this year.
In essence, first in the work carried out during October and November, subsequently within the Eurogroup and, lastly, within Ecofin, a broad consensus has been achieved on the substance of the recommendations formulated by the Commission and on the substance of the adjustments introduced by France and Germany.
Let us move on to procedural matters. The Commission proposed the two recommendations pursuant to Article 104(9) on the basis that Germany and France had persistently failed to put into practice the Council’s recommendations. Germany and France, whilst accepting the substance of the recommendations, for political reasons requested a different format, that is to say that a second series of recommendations be reformulated pursuant to Article 104(7). The Council’s Legal Service, when consulted on the matter, said that the Commission could also have taken – and I emphasise the word ‘also’ – this second route. The Commission excluded it. At this point a deadlock developed: there was a risk that the most important thing, namely the substance, would be lost for reasons of form. In order to overcome the deadlock without exacerbating matters, the Eurogroup, on the basis of a broad consensus, incorporated the substance of the recommendations into draft conclusions. The validity of this procedure was again confirmed by the Council’s Legal Service. Subsequently, when Ecofin started its work, the Commission explicitly registered its disagreement, calling for an express vote on the second series of recommendations for Germany and France. The necessary majority was not obtained. It should be noted that the vote of the Ecofin Council on the Commission’s recommendations is explicitly provided for by the rules currently in force and is therefore perfectly compatible with such rules. After the failure to approve the Commission’s recommendations, the Council voted on the conclusions drawn up earlier in the Eurogroup. The conclusions were approved and the discussion resulted in the unanimous adoption of the Council statement."@en1
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