• Dijsselbloem - Eurozone rules to be re-assessed before the end of 2014 (Photo: consilium.europa.eu)

EU to revisit budget rules by year's end, says Eurogroup chief

20.06.14 @ 09:26

  1. By Benjamin Fox
  2. Benjamin email

BRUSSELS - The European Commission and government ministers will re-assess the bloc’s rules on deficit and debt limits by the end of 2014, the eurozone’s lead official has said.

But Dutch finance minister Jeroen Dijsselbloem, who chairs the monthly meeting of the eurozone’s 18 finance ministers, insisted that the terms be kept to for now.

"All the ministers stressed the importance to stick to the rules as they are now," he told a news conference in Luxembourg on Thursday (19 June). "At the end of the year... we will look at whether we can make them less complex."

The EU’s stability and growth pact requires governments to keep budget deficits below 3 percent and debt levels to 60 percent. It has also been stiffened in the wake of the eurozone debt crisis to make it easier for the commission to impose reforms and, ultimately sanctions, on reluctant governments.

But the effectiveness of the regime has been called into question this week.

Germany’s economy minister Sigmar Gabriel appeared to distance himself from his country’s long-standing commitment to budgetary austerity on Monday, commenting that “no one wants higher debt, but we can only cut the deficit by slowly returning to economic growth.”

Critics say that the 3 percent deficit limit enshrines austerity and prevents governments from putting in place stimulus measures to ease the pain of economic recession and boost demand.

For his part, Italian prime minister Matteo Renzi has conditioned his support for Jean Claude Juncker’s bid for the European Commission presidency on whether the former Luxembourg premier backs his plans to give governments more scope to pursue public investment programmes.

Renzi has also made clear already that the issue will be raised during his country's six-month EU presidency which starts next month.

But Gabriel’s boss, finance minister Wolfgang Schaeuble, offered no signs that he would accept a re-opening of the pact’s main provisions.

"We don't need to change the rules, we have to stick to them," he said, adding that "the existing rules provide enough flexibility."

Meanwhile, an IMF report presented to ministers by the Fund’s managing director, Christine Lagarde, urged them to simplify the pact, which had, it said “become excessively complicated with multiple objectives and targets.”

“There is a worry that the framework discourages public investment,” it added.

Outgoing economic affairs commissioner Olli Rehn told reporters that any moves to ease the implementation of the rules would be dependent on countries first pursuing reform programmes.

"We can first verify that structural reforms are really moving forward and then see if this would justify some extension in the correction deadline," he said.

Rehn, who was attending his last Eurogroup meeting before taking up a seat in the European Parliament, was one of the main architects of the revised pact.