Tuesday

26th May 2020

Italy and Spain close to breaking euro rules

  • The exercise is more about partnership than penalties, says Brussels (Photo: EUobserver)

Single currency states felt the long arm of the European Commission stretch into national affairs on Friday, as the Brussels executive published in-depth reviews of their draft 2014 budgets.

Just two euro states - Estonia and Germany - were give the all clear, while five were warned they are close to breaking the single currency's rules.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

EU economic affairs commissioner Olli Rehn described the first ever use of new economic governance rules, which require euro countries to submit their budgets for review in the EU capital each October, as a "milestone."

"We have made sure that member states practised what they preached," he said on euro rules which limit public debt and deficit.

Italy and Spain - the eurozone's third and fourth largest economies - as well as Finland, Luxembourg and Malta were told they are at risk of breaching the stability and growth pact.

All five countries were urged to "take the necessary measures" to bring their economies back into line.

Austria, Belgium and Slovakia were told their budgets were "broadly compliant" with euro rules. France, the Netherlands and Slovenia were told they were "compliant" but "without any margin for possible slippage."

Bailout countries Cyprus, Greece, Ireland and Portugal were not part of the assessment.

Although the commission identified some large problems in the some of the national budgets - such as the fact that Italy's debt reduction targets for 2014 will not be met - it did not use the biggest weapon in its armoury.

It said none of the assessed countries had been found in "serious non-compliance" with euro rules, so it is "not necessary to request revised budgetary plans."

Rehn denied the commission is taking a soft approach for the first airing of the rules and avoiding the politically sensitive issue of asking a country to change its spending plans.

But he hinted that next time round, the commission would be more rigourous: "I am sure we will improve the methodology in the future."

With increasing concern about the extent to which Brussels can now manage national budgets - a response to the financial crisis - Rehn was keen to say the process is for the member states' own good.

"The exercise is much more about partnership than penalties," he said.

But the assessment is likely to be met with annoyance in at least one member state - Italy.

The country was told that it would be unable to exempt the public funds it uses for investment from counting up its debt, a clause it had been hoping to take advantage of.

Rehn had little sympathy for the argument that the setback comes as at sensitive time in Italian politics, with the country trying to stabilise itself after months of politically uncertainty.

"Every day this year has been a politically sensitive moment in Italy," the commissioner said.

Meanwhile, even the eurozone's best pupils came under fire.

Rehn noted that Germany had not made any advances on the structural reforms recommended to it by the commission in summer and last year.

He is due to discuss Friday's findings with euro countries in a week's time.

He noted that the commission had learned it needs fewer "overlapping" recommendations for member states, with countries previously in breach of euro rules having multiple sets of instructions from Brussels.

But he said Brussels' increased powers of scrutiny are having an effect.

He noted that fiscal deficits "continue to come down in the European Union from about 6-7 percent to above 3 percent this year and below 3 percent next year."

Agenda

Key budget votes in Strasbourg this WEEK

MEPs gathering in Strasbourg this week are set to give their final blessing to the EU budget for 2014-2020 and top up the current one to cover compensation for floods and drought.

Coronavirus

ECB promises (almost) whatever it takes

The eurozone's central bank has promised to buy up to €750bn of government and private bonds in new pandemic counter-measures.

Opinion

What does coronavirus 'Black Swan' mean for markets?

Falling demand and prices for oil and raw materials will revive the risk of deflation. The collapse in international trade and long-term rethinking of China's role as the major hub for the production of consumer goods and electronics is inevitable.

Stakeholders' Highlights

  1. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  2. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  3. UNESDACircularity works, let’s all give it a chance
  4. Nordic Council of MinistersNordic ministers call for post-corona synergies between economic recovery and green transition
  5. Nordic Council of MinistersNordic co-operation on COVID-19
  6. Nordic Council of MinistersNordic research collaboration on pandemics

Latest News

  1. Recovery plans unveiled This WEEK
  2. EU and UK stumbling into Irish border crisis
  3. Malta patrol boat 'intimidates' capsized migrants
  4. How coronavirus might hit EU defence spending
  5. Herman Van Rompuy on power and influence in the EU
  6. EU links access to recovery fund to economic advice
  7. EU wants to halve use of pesticides by 2030
  8. Top editors alarmed by media cuts in EU and beyond

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Join EUobserver

Support quality EU news

Join us