Local view for "http://purl.org/linkedpolitics/eu/plenary/2004-09-15-Speech-3-107"
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"en.20040915.6.3-107"2
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".
Mr President, ladies and gentlemen, Mr President-in-Office of the Council, I would like to start by thanking you for inviting me to this debate on the Stability and Growth Pact. As you know, in September the European Commission approved a communication on strengthening economic governance and clarifying the implementation of the Stability and Growth Pact.
With regard to budgetary coordination, the Commission's proposals aimed at strengthening and adapting the Stability and Growth Pact are based on four main issues. Firstly, the need to place more emphasis on the level of indebtedness and on the sustainability of public finances throughout the process of monitoring the evolution of those public finances in each of the Member States. In principle, compliance with the maximum limit for deficit of 3 % must guarantee an adequate reduction in the level of indebtedness and the sustainability of the public finances of each country. In practice, however, in many countries the evolution of debt has not been as expected due to the application of exceptional measures or the appearance of implicit debts. We must therefore pay more attention to the evolution of debt in addition to tight control of the evolution of public deficit.
It must be made clear that the problem of sustainability does not only affect countries that already have high levels of debt, above the reference value of 60 %, but also other Member States where the percentage of their debt in relation to Gross Domestic Product is increasing or where, though it is not increasing at the moment, they know that in the future very important and very difficult challenges have to be faced, including those resulting from demographic developments and the ageing of the population.
Secondly, the Commission is aware of the need to take more account of the different national situations when it comes to monitoring the budgetary evolution of each of the countries and, in particular, when it comes to determining the mid-term objective. In a Union of 25 countries it is not a question of creating an
pact – as some people have said – it is not the Commission’s intention to do that, but rather to apply the economic logic that suggests that it is not advisable to establish a uniform mid-term objective for the evolution of the public finances of each and every country of the enlarged Europe.
At the same time, the specific mid-term objectives for each country must in all cases guarantee compliance with the 3 % of GDP rule for their public deficits. Equal treatment for the different Members States is thereby guaranteed, regardless of their differing situations in terms of the sustainability of their public accounts.
Thirdly, the Commission believes that the debate must deal with the need to apply measures quickly, to increase the use of the preventive measures of the Stability and Growth Pact. We all know that, at the end of the Nineties and the beginning of this decade, not all the Member States took advantage of the good state of their economy, of the good stage they were at in the economic cycle, to consolidate their public finances sufficiently, which means that at times of economic difficulty they are not able, or find it very difficult, to obey the 3% rule.
All of these aspects – these first three blocks of ideas – as the President-in-Office of the Council, Mr Zalm, has said, were received favourably by the Council almost immediately. On the corrective part of the Pact there was more debate and there will continue to be so in the future.
In order to be consistent in our preventive measures, we also need, in the corrective part of the Pact, in the excessive deficit procedure, to take account of the circumstances of each country and which stage of the cycle each country's economy is at. How can this be done? By means of two possible procedures. Firstly, the current definition of exceptional circumstances included in the Stability and Growth Pact can be improved, allowing a country not be included in the excessive deficit procedure, despite being above the 3% of deficit, if it has been in a prolonged situation of growth beneath its potential level.
In order to distinguish between periods of cyclical low activity and those of structural low activity and in order to avoid weakening the surveillance framework, the other two requirements contained in the current exceptional circumstances clause must be applied strictly in all cases. That is to say that the deficit must be temporary and there must not be much deviation from the 3%.
A second consideration is the need or the possibility to adjust the path of deficit correction, the speed with which a country which is above the 3% must bring its public deficit below that reference value. The differences between the cyclical situations of the different countries in this position justify this approach.
In any event, the Commission’s Communication maintains the principle that an excessive deficit must be corrected quickly, but – as Mr Zalm has said – the influence of other economic factors, other than the intensity of the effort being called for and being made by the country in question on the budgetary results must be considered.
I believe it is very important that there be a debate not just in the Council, like the debate we held last weekend – and those we will have over the coming weeks and months – but also in this Parliament and in the national parliaments, on the framework for economic governance and, in particular, the situation and the future prospects of the Stability and Growth Pact.
In any event, there is an interrelationship between these two elements included in the exceptional circumstances clause. There is a trade-off here. We cannot choose to increase the room for manoeuvre in the two simultaneously in an uncontrolled manner. If more emphasis is placed on reviewing the entry of a country into the excessive deficit procedure, we will have to be more rigid on the adjustment path. If the current rigidity in relation to entry into the excessive deficit procedure is maintained, the possibility of adjusting the deadlines once the country has been integrated into that procedure may be considered in order to conform to the Treaty.
I am convinced that these improvements are going to provide a basis for strengthening the framework for economic governance of the Economic and Monetary Union, that these ideas and the debate which we will be holding following last weekend not only do not weaken the pact but in fact strengthen it, because the weakness of a pact, the weakness of a fiscal framework, does not just stem from the theoretical brilliance of the rules we all respect
or in theory, but also from the capacity to apply those rules and, as the recent judgment of the Court of Justice of the European Communities states, the decisions fall to the Member States meeting in the Council. The Commission maintains its right to present proposals, but it is the Council, the Member States, who must apply the rules that they themselves have committed themselves to by approving the Treaty and the subsequent regulations.
We cannot demand that the Member States approve rules which they do not believe in themselves. And, if experience suggests that certain rules require adaptation, it is better to adapt them than not to respect them, leave them unchanged and carry on failing to comply with them, which has unfortunately been the situation at times with the Stability and Growth Pact.
As the President-in-Office of the Council, Mr Zalm, has said, last weekend in the Hague, both in the Eurogroup of 12 and around the table of the extended Eurogroup – the informal Ecofin of 25 – we held an initial debate on this issue. The Council has agreed that the Commission’s Communication provides a good basis for discussion and now we trust that in the coming weeks and months the work we are going to carry out at a more technical level between representatives of the Member States in the Economic and Financial Committee and the Commission will allow us to go to the November Ecofin with a degree of agreement with much more content than we have been able to debate and achieve on many points involving the more general ideas and principles included in the Commission’s Communication.
As Mr Zalm has also said, the draft Constitutional Treaty approved in June ratifies what is already included in the Treaty and we do not propose changing it. They are the basic principles, the basic reference values in terms of the evolution of public deficits and public debt and the excessive deficit procedure, as defined in the current Article 104 of the Treaty.
It is not therefore a question of discussing what is not subject to discussion, because that is in the current Treaty and is going to be in the future Constitution. What we need to do is debate proposals to improve, strengthen and clarify its application and improve the degree of compliance with the framework laid down in the current Treaty and provided for, amongst other things, in the Stability and Growth Pact.
This framework is based on national but coordinated economic policies involving budgetary policies that must conform to the 3% limit for budgetary deficit and the debt criterion of 60 % of Gross Domestic Product.
On this basis, the Commission’s ideas expressed in the Communication deal with both the coordination of economic policies and the coordination and surveillance of budgetary policies.
With regard to economic policy, we believe there is a clear need to coordinate our actions better in the field of structural reforms and increase our efforts to implement the Lisbon Agenda. Europe needs to increase its growth potential and create more jobs and we cannot work solely on the basis of one instrument – the Stability and Growth Pact – in order to coordinate our economic policies.
We must therefore use the broad economic policy guidelines more effectively, an instrument which, by its very nature, is more flexible than the Stability and Growth Pact and, at the same time, we must improve the application of the Stability and Growth Pact by applying the preventive measures and aspects of the Pact more frequently and effectively, strengthening mutual control (peer pressure) and, in particular, we must do so during favourable periods of the economic cycle."@en1
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