Tuesday

16th Jul 2019

EU warns Portugal, says bloc needs permanent crisis fund

  • European economy commissioner Olli Rehn (Photo: European Commission)

The European Commission has warned Portugal it may need to take extra steps to cut its budget deficit this year, adding that the economic crisis has highlighted the need for a permanent fund inside the eurozone to help struggling states.

Speaking to journalists in Brussels on Wednesday (14 April), economy commissioner Olli Rehn said Portuguese government plans to reign in excessive spending and increase tax revenues were generally solid, but not without risk.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

"If risks to the macro and fiscal developments materialise in the short term, additional measures might be needed especially for this year," said the Finnish politician who took over the EU's economy reins in February, in the middle of an economic storm.

In a bid to avoid similar difficulties to those seen in Greece, Lisbon unveiled a draconian package of austerity measures early last month, but investors have expressed doubts at the centre-left minority government's ability to push them through.

As a result, markets have continued to identify the southern European economy as one of the euro area's most vulnerable, leading the Fitch credit rating agency to downgrade Portugal's rating late March.

The same agency on Wednesday said Greece may be forced to call on a recently brokered EU/IMF rescue plan before the end of April. "It could well be a week or two. I don't think they could leave it much longer than that," Fitch rating's director Christopher Pryce told Bloomberg news.

During a teleconference last Sunday, eurozone finance ministers agreed to provide up to €30 billion in bilateral loans to Athens this year, should it be requested, with an estimated €15 billion potentially coming from the IMF. The commission has denied reports that the overall three-year (2010-2012) package for Greece from euro area members might amount to as much as €90 billion.

Permanent EU crisis fund

Mr Rehn's comments on Portugal came shortly after the college of 27 commissioners held its first "exchange of views" on plans to increase economic co-ordination and surveillance within the EU, in order to prevent future fiscal crises.

EU budgetary restrictions are laid down in the bloc's Stability and Growth Pact, but rules limiting annual deficits to three percent of GDP, and total debt to 60 percent of GDP, have repeatedly been broken by national governments. "Peer pressure lacked teeth, good times were not used to reduce public debt, macroeconomic imbalances were neglected," said Mr Rehn.

As a result, the EU executive body says it will come forward with concrete plans on 12 May to toughen up the bloc's fiscal rules, measures that it argues can be carried out under the current Lisbon Treaty.

The communication, draft details of which will be discussed by EU finance ministers meeting for an informal meeting in Madrid this Friday, will seek to sharpen the teeth of the Stability and Growth Pact, potentially calling for a suspension of EU cohesion funds for repeat offenders.

The document will also explore mechanisms to limit the build up of macro-economic imbalances between member states, and outline proposals to set up a permanent crisis fund to help struggling states.

"The ad-hoc mechanism for possible financial assistance for Greece serves the immediate need," said Mr Rehn. "However the college is of the view that it is necessary to set up a permanent crisis resolution mechanism with strong built-in disincentives for activation, including of course vigorous conditionality."

"We see this of a last possible resort ...but still, as we have seen, better safe than sorry," he added.

Commission defends it right of initiative

At a European Summit in Brussels last month, EU leaders asked the council's new permanent president, Herman Van Rompuy, to establish a task force on greater EU economic co-ordination, charged with drawing up measures by the end of the year on how to achieve this aim.

Some seasoned EU observers subsequently said the move amounted to an erosion of the commission's sole right to initiate EU legislation.

On Wednesday, centre-right MEP Corien Wortmann-Kool said she supported the commission's move to come forward with its own proposals anyway. "For us, it is very important that the commission uses its right of initiative and does not wait for the task force to come up with its own proposals," she said.

EU to review national budgets under commission plans

The budgets of eurozone members could first need EU approval before being then being passed on to national parliaments, under radical new plans to be presented by the European Commission this May.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

News in Brief

  1. Ansip's ex-cabinet chief to head EU cybersecurity agency
  2. Malta starts trial of journalist murder suspects
  3. Full text of von der Leyen candidacy speech to MEPs
  4. Von der Leyen open to further Brexit delay
  5. Von der Leyen promises carbon border tax
  6. Brexit: both UK PM candidates say Irish backstop is 'dead'
  7. Mogherini: Iran's nuclear enrichment 'reversible'
  8. Report: Selmayr to leave 'next week'

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. Son: Malta trial for murdered journalist 'not enough'
  2. Von der Leyen's final appeal to secure top EU post
  3. EU talks tough on Turkey, but arms sales go on
  4. The Abortion Exodus - more Poles and Croats going abroad
  5. Poland's ex-PM loses EU parliament chair again
  6. Von der Leyen reaches out to left and liberal MEPs
  7. Farmers among new MEPs deciding on EU farming money
  8. Von der Leyen's EU vote far from sure

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Join EUobserver

Support quality EU news

Join us