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24th Sep 2022

Germany wants EU fund to enforce fiscal rules

  • Wolfgang Schaeuble: the European Commission has become too political to enforce EU rules (Photo: Tatra Summit)

Germany has said that “neutral” bodies, such as the European Stability Mechanism (ESM), should take over from the European Commission on implementing fiscal rules.

Speaking at the Tatra Summit, a conference organised by the Globsec think tank in Bratislava on Friday (28 October), German finance minister Wolfgang Schaeuble said that the commission was becoming too “political” to do the job right.

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“In some ways, the commission must move in the direction of becoming a European government, but when it’s a matter of implementing the rules we need some neutral institutions”, he said.

He said that, as a federalist, he would have preferred a full-blown fiscal union and joint eurozone government.

He said that, since there was no appetite for EU treaty change, the bloc should instead use existing instruments, such as the ESM, its financial emergency fund, to “repair” the way it works.

The commission has let France and Italy off the hook on budget deficits. It also decided last summer not to impose sanctions on Spain and Portugal.

It did it in part because France was heading into elections with the anti-EU National Front party posing a threat.

Italy was struggling with earthquake reconstruction and refugee costs, as well as a referendum that could catapult an anti-euro party, the 5 Star Movement, into power.

Commission head Jean-Claude Juncker recently also said that France got flexibility “because it’s France” - a remark which indicated that big EU states could break rules with impunity.

“That is a philosophy that doesn’t work for the European Union”, Schaeuble said on Friday.

Citing a remark by European Central Bank chief Mario Draghi, Schaeuble added: “If finance ministers don’t stick to the rules they’ve given themselves, where will trust come from in our currency?”.

Because it’s France

Pierre Moscovici, the EU finance commissioner and former French finance minister, defended Juncker’s comments at the Bratislava debate.

“Our president [Juncker] loves France. What he said was maybe just a sign of sympathy”, Moscovici said.

“There is no discrimination in the commission no matter what the colour of the country, its political family, or its size. We have just one compass - the rules”, he said.

He said the commission is “political” to the extent that it takes into account the specific situation in member states when deciding whether to impose sanctions.

He said events such as earthquakes, refugees, and national elections “should be taken into consideration”.

“I’m not very enthusiastic about that”, he said on Schaeuble’s ESM idea.

He said the ESM, or similar bodies, such as the European Systemic Risk Board, which were set up during the financial crisis, were “purely financial and technical” with “no democratic control”.

“No. I think this [fiscal monitoring] should still be in the commission”, he said.

He said the current set up works because, despite the commission’s flexibility, eurozone budget deficits fell from more than 6 percent in 2010 to some 2 percent today.

One of Moscovici’s advisors told EUobserver that Schaeuble’s ESM idea did not amount to a serious proposal at this stage.

“It’s not even an academic discussion. He [Schaeuble] just made a remark to press and the commissioner responded”, the aide said.

Jobs not concepts

The French and the Italian finance ministers, who also took part in Friday’s debate in the Slovak capital, backed the EU commissioner.

France’s Michel Sapin said that if the commission had thrown the book at France it could have given ammunition to the National Front.

He said the ESM approach would only work if fiscal rules were a matter of red or green lights, but that, in reality, “we often talk about flexibilities when we are somewhere between the red and green”.

Sapin added that the word “political” is all too often used negatively. “It is not [negative]. It’s about a very fine assessment of the situation and seeing how rules can be applied flexibly”, he said.

Italy’s Pier Carlo Padoan said average people are more interested in jobs than in abstract financial concepts.

“Most Europeans don’t know what 'banking union' or 'surplus product' are. They want jobs. They want to know if their kids will have jobs … We need more instruments that link financial stability and discipline to jobs and growth”, he said.

He said Italy should be rewarded for “doing a service to Europe” by policing its southern border and by taking care of asylum seekers coming from Libya.

“Of course the rules must be respected, but sometimes the rules are badly designed”, he said.

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