Friday

20th Jan 2017

Barroso: EU budget rules are 'adaptable'

  • (Photo: Images_of_Money)

The European Commission has indicated it is prepared to give struggling countries some leeway to bring their debt back in line with EU rules but continues to insist that member state cannot spend their way out their problems.

The issue is central to the EU's dance with the markets as the commission tries to find a balance between being credible with nervous investors by enforcing the rules underpinning the euro, while not pushing countries into a downward spiral of debt-reduction measures.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Spain, the eurozone fourth largest economy, is the first country to really test the beefed-up rules. It is supposed to reduce its budget deficit from 8.5 percent of GDP to 5.3 percent next year. EU rules say the budget deficit must be no bigger than 3 percent of GDP.

But next year's target, agreed with the commission, is in doubt with the already strong budget cuts seen as insufficient given the country's low growth prospects. Meanwhile, the social effects are becoming clearer. Unemployment among Spain's youth is hovering around 50 percent.

Speaking less than a month before the commission is due to give its verdict on Spain and other member states' budget policies, president Jose Manuel Barroso suggested his institution will be less than dogmatic in applying the rules.

"The rulebook allows for adaptability while remaining firmly focussed on sustainability," he said.

Flanked by economic affairs commissioner Olli Rehn for a "growth" pep-talk to mark Europe Day on 9 May, Barroso noted that the stability pact, governing the euro, is designed in an "intelligent way."

For his part, Rehn said the pact implies "differentiation among the member states according to their fiscal space and macroeconomic conditions."

But both were insistent that spending and greater debt is not the way out of the crisis. Barroso said it would be "completely irresponsible" to advise Greece, Ireland and Portugal - all recipients of an EU-International-Monetary-Fund bail-out - to "try to restore growth by increasing their deficit."

The commission president also blamed member states for the lack of growth-oriented initiatives, pointing to the "bickering" which hinders the single EU patent coming into place as an example.

He also said he wants countries to agree to projects bonds - a private sector-focussed way of financing infrastructure - during June's traditional summit, as well as increasing the lending capacity of the European Investment Bank.

While not accepting any political responsibility for the recent electoral outcomes in Greece (where fringe anti-austerity parties scored well) and France (where a socialist was elected), Barroso said that there was a "new consensus" that consolidation policies must be combined with growth.

EU leaders are once more to discuss growth at an informal meeting on 23 May. The occasion will be the first time that France's new president Francois Hollande, who has said austerity is not "inevitable," will also be around the table.

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey