Sunday

27th Nov 2022

Prodi calls stability pact 'stupid'

  • ROMANO PRODI - Commission president: "The stability pact is imperfect, it is true, because it's necessary to have a more intelligent tool and more flexibility." (Photo: European Commission)

Commission spokesman Jonathan Faull had to carry out a damage limitation exercise after an interview by Commission president Romano Prodi with Le Monde. Mr Prodi's unguarded comments on the growth and stability pact were published in the Thursday edition of the French paper. "I know very well that the stability pact is stupid," said the president "as are all decisions that are rigid."

Bad timing

What he meant, said his spokesman, was that "a rigid dogmatic implementation of the pact would be stupid." He was backed up "fully" by the spokesman for economic and monetary affairs Commissioner, Pedro Solbes.

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Despite their best efforts, there was no hiding the fact that the timing of Romano Prodi's comments could hardly have been worse. The stability pact, which provides the economic rules underpinning the euro, is going through painful problems at the moment. Portugal has already breached the pact's limit of 3 per cent of GDP budget deficit, Germany has admitted that it is likely to do so and France is openly going against the rules.

Anger by smaller EU states

Mr Prodi's comments also follow those of a fellow commissioner, Pascal Lamy, responsible for trade, who recently criticised the pact as being "medieval." Yesterday, Mr Solbes dismissed Mr Lamy's comments as having an "external angle" on the pact before adding that the trade commissioner "knows more on trade policy." So far, Mr Solbes has offered no comment on the Commission president's statements.

Last month, Mr Solbes bowed to pressure from large member states and made the pact more flexible by moving the date from 2004 to 2006 by which countries have to balance their finances and demanding that member states reduce their structural deficit by 0.5 per cent of GDP each year. This move was met with anger by smaller EU states who had made the attempt to adhere to the pact's rules.

Mr Prodi's ill-timed comments are being interpreted by many as a sign that the much-maligned rules governing euro nations are on their way out.

EU 15 argue over stability pact flexibility

Germany, Britain and France want to make the controversial growth and stability pact rules more flexible, but this plan is facing a stout resistance as almost half of the EU member states have expressed their doubts about this reform, reports the Financial Times. The Commission has proposed a plan, under which countries with sound economies would be given rewards, while those with high debt and persistent deficits would face no mercy.

Prodi advocates changes in Stability Pact

Commission President Romano Prodi held to his earlier statements on the stability pact, where he had termed as stupid its rigid rules. Speaking during a debate in the European Parliament where he was invited to clarify his statements, Romano Prodi said the stability and growth pact has limitations due to its institutional framework in which it is applied, and said the EU institutions have a duty to say publicly what they think could be improved. "It is time that we said in public what we say in private," Mr Prodi said.

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

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