• Budapest: 'This approach undermines the credibility of the whole procedure' (Photo: Axel Buhrmann)

Four states push back against 'EU Semester'

15.06.11 @ 17:34

  1. By Leigh Phillips

BRUSSELS - The European Commission has warned against a "watering down" of the new system of centralised oversight on national economic planning after the Hungarian EU presidency accused Brussels of steamrolling through the process and leaving no time to assess what is being proposed.

In an angry letter seen by EUobserver, the Hungarian finance minister, Gyorgy Matolcsy, last week blasted the new 'European Semester', under which the commission and the Council give direction to national fiscal policies, saying that the way that the EU executive has handled the process so far undermines its credibility even as it is just getting off the ground.

Addressed to EU economy chief Olli Rehn and the Hungarian commissioner, Laszlo Andor, the letter complains that the commission is pushing through the process without giving states the time to access the recommendations before they have to be approved by the European Council.

"This approach undermines the credibility of the whole procedure," said the minister, whose country holds the six-month rotating presidency and shepherded in the new EU semester system.

Expressing his "serious concerns regarding the course of action the commission took during the European Semester," Matolcsy complained that Hungary was one of the few countries to submit its budget and economic planning documents on time, the minister said he expected Brussels would have allowed some give and take with Hungarian officials before the recommendations were published.

"We had provided the opportunity to the commission services to have an open and frank dialogue regarding the details of the programmes," he wrote. "Unfortunately, the commission services did not grasp this opportunity."

The commission's recommendations were only published on 7 June, leaving insufficient time for experts and policy makers to review them ahead of the EU Council at the end of the month, he said.

He also went on to attack the content of the commission's assessment of the country's fiscal plans: "Let me underline that our opinion differs substantially."

Principally, he disagreed with commission's assessment the country's domestic economic projections, which Brussels had suggested was over-optimistic, calling for further austerity measures.

The minister argued that growth in domestic demand will be robust and that its pension reforms will reduce public debt in the "short, medium and long term." Matolcsy attacked the commission's assessment of its pension measures as "absolutely misleading."

The minister concluded that as a result of these "shortcomings" in the Hungarian case, a review of the entire system "may be deemed necessary."

Hitting back at Budapest on Wednesday, commission economy spokesman Amadeu Altafaj-Tardio said far from the commission undermining the EU Semester process, the behaviour of member states presented a "credibility test for the new system."

He said that Spain and France had also pushed back against some of the recipes handed out to them, although not formally.

Denmark also on Tuesday pushed back against the commission's call for the country to increase property taxes. Brussels is worried that artificially low mortgages on homes could create a property bubble.

Brian Mikkelsen, the commerce minister, told Berlingske newspaper: "The economy isn't in trouble just because people have borrowed money. They also have a lot of money. I disagree with the evaluation of the situation."

French senior officials have complained about language in the commission's assessment calling for an increase to the retirement age after the country hiked it last year, a move that provoked widespread strikes and blockades. Paris is not eager to endure such upheaval so soon.

The country is also resistant to demands that the country shift taxation away from progressive labour taxes and onto flat-rate VAT and green taxes. Madrid is also reluctant to go down this path.

Altafaj-Tardio however said that member states had already agreed to such moves via their endorsement of the 'EU 2020' strategy, a framework to boost competitiveness in the bloc.

He also pointed out that the rapid timetable has been adopted by prime ministers and presidents. "All member states, including Hungary, were of course well aware of this date," he said.

He rejected the idea of any negotiations between the commission and member states over the timeframe: "Independence and credibility would have been undermined had the Commission engaged in a dialogue with national authorities over the content of the recommendations."

And he warned against the process of peer review leading "to any watering down of the level of ambition that is needed to bring Europe back onto a solid track of growth."

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