Jean-Claude Juncker, talking to Jyrki Katainen prior to the weekly Commission meeting at the European Parliament in Strasbourg on January 13
On Tuesday (January 13) Brussels communicated legal details on how to implement its 315 billion euro investment plan and how to select projects to be financed. But the key aspect is what appears to be a main turn in the way Brussels is tackling the crisis. The Commission officially admitted more leniency for the EU member countries to reduce their fiscal deficits.
The EU commissioners reiterated so often that the rules remains the same that in the end it was difficult to believe them. “We are not changing the rules of the Stability and Growth Pact,” said Valdis Dombrowskis, vice-president of the European Commission, and as his colleague Pierre Moscovici, Commissioner for Economic and Financial Affairs.
But the new guidelines presented on Tuesday in Strasbourg are smoothly changing the rules – and probably show a real change in the way Brussels wants to to deal with the members which not respect the Stability and Growth Pact.
This pact, a cornerstone of the eurozone, sets the maximum budget deficit at 3 percent of GDP and public debt at 60 percent of GDP.
Not changing the rules, but practice will not be the same
Several of the measures presented in Strasbourg could bring more space to countries like France and Italy, which have difficulties to comply with the rules of the Stability and Growth Pact.
According to a matrix presented by the Commission, Italy would only have to cut its deficit by 0,25 points each year under the new guidelines. Before the new rules, the effort required was two times higher.
“The purpose of today´s communication is to reflect on flexibility under the existing rules,” Moscovici underlined and stated that fiscal responsibility is not sufficient for jobs and growth.
“The smarter application of the stability and growth pact that we are announcing today will help us to make more decisive progress on all three fronts: We want more investment, we need to encourage structural reforms and we defend fiscal responsibility,” Moscovici stated
In future, the Commission will thus take into account “the positive fiscal impact of structural reforms”, it stated. This will be valid for countries that do not respect the deficit limit of 3 percent foreseen by the pact.
In case that a member state brings proof that the reform will have a positive impact on the budget, this impact will be taken into account by the Commission.
Thus, the so called “investment clause” will allow a country to deviate temporarily and under certain conditions funds to investment.
No excuse not to invest
The Commission also indicated that EU countries willing to contribute to the 315 billion euro European Fund for Strategic Investment (EFSI) will get a favourable treatment under the Stability and Growth Pact. Possible national contributions to the fund “will not be counted when defining the fiscal adjustment” of the Pact.
Countries not respecting the reference value of a 3 percent deficit will not have to face a deficit procedure, if the excess is due to the contribution to the fund.
“This interpretation of the Commission is meant to be a powerful invitation to member states to invest in the new fund and to support by this investment and economical relaunch. In other words, member states will not be able to use the excuse that the rules of the pact are too strict for not investing.”
Six experts will select the projects
EFSI will be definitely be another acronym to remember when it comes to instruments of European financial politics.
The communication released in Strasbourg today by the Commission was also the opportunity to present the implementation details of the EFSI, which will be established by the European Commission and the European Investment Bank (EIB) to boost investment in Europe.
Every partner joining the fund will have its say in the steering board that will manage the fund. No decision can be taken against the vote of the Commission or the EIB though.
A key role in this investment plan will be played by the Investment Committee, which will decide which projects will be financed by the fund. These decisions will be taken “without any geographic or sectoral quotas” by six “independent market experts,” the Commission clarified in its statement. The selection will not be political, Katainen pointed out.
“This is a very important point for the private sector. They have said very clearly to us that the reliability of the investment projects must be at highest level in order to strengthen and to trust the EFSI,” Katainen said.
Brussels announced that besides the Investment Committee, a European Investment Advisory Hub will be implemented to help to identify projects and to get them ready for financing.
The Commission also intends to include a EU Guarantee Fund. This will act as “safety puffer” in case of losses after investing in non-profitable projects. This fund will also be maintained by EU money. The Commission wants it to gradually reach 8 billion euros by 2020.
- Author: Danièle Weber, Euranet Plus News Agency
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