EU ratifies crisis makeover to Stability and Growth Pact

Speaking to a regional party conference on Monday (26 September), German Chancellor Angela Merkel urged the adoption of stronger powers for the EU to intervene in the budgets of member states that break fiscal rules.

"There should be the right to declare such budgets null and void [...] otherwise we will not get out of the situation," she said according to Reuters. Such a move however, would require further changes to the eurozone's economic rulebook and ratification by national parliaments.

Guy Verhofstadt, Leader of the Liberal group in the European Parliament, claimed victory after the vote, saying the reform will strengthen the preventive arm of the Stability and Growth pact. But he warned that the six-pack was "not the panacea" and that it should be seen as part of a future "comprehensive framework for economic governance and growth in Europe".

French centre-right MEPs faithful to President Nicolas Sarkozy hailed the adoption of the package as "an historic step" for the euro zone. "The Greek sovereign debt crisis brings more evidence each day of the need for genuine European economic governance, and a strong, credible Stability and Growth Pact," the MEPs said in a statement. "It is because member states have become accustomed to living beyond their means and dig their deficits that the markets – but also our fellow citizens – have lost confidence in our currency," they added.

With the campaign for next year's presidential race heating up, the centre-right MEPs also seized the opportunity to criticise their Socialist rivals, who voted against the reform.  "Unlike the French Socialist MEPs, we take our responsibilities," they said in the statement.

French socialist MEPs, for their part, begged to differ: "While it is obviously necessary to ensure proper management of public accounts, enforcing austerity today will put growth and jobs in peril," said Catherine Trautmann MEP, president of the French Socialist delegation in the European Parliament. Such a situation "would put us in a position where we would be unable to repay our debt," and thus worsen the crisis, she added, saying socialists had taken their "own responsibilities".

The Greens/EFA group in Parliament criticised the 'six-pack' reforms, saying the "one-sided preoccupation with the simultaneous austerity in all member states is a self-defeating, pro-cyclical cocktail."

"The Greens fully agree that there is a need for strong, binding limits to public deficits but this has to take fully into account social justice and the future investments of the EU that are necessary to ensure a sustainable economy. This implies looking at revenue, as well as expenditure. The failure to do so in these proposals will result in an excessive reliance on austerity programmes that will exacerbate poverty and destroy popular support for the European project," said Green economic affairs spokesperson Philippe Lamberts.

The European Parliament's leftist group GUE/NGL slammed the 'six-pack' as a "recipe for disaster" and "an attack on democracy" that will remove key economic policy decision-making from democratically-elected national governments.

"With the reinforced Stability Pact, the Commission will be empowered to sanction member states that are not meeting EU targets on deficits and debt. Furthermore, countries that are not able to compete with the wealthiest economies in the EU will be forced to follow reform plans drawn up by the Commission. In Greece, we can see where this road leads - deeper recession, social unrest and zero revival of the infamous 'market trust'," German MEP Jürgen Klute said after the vote.

According to GUE MEPs, "the package effectively institutionalises austerity across Europe and will most likely exacerbate the recession".

ETUC, the European Trade Union Confederation, slammed the 'six-pack' reforms, saying it "could trigger Europe-wide downwards wage competition, impose brutal and unbalanced fiscal austerity" and ultimately, "depress economic activity." ETUC welcomed however the clear statement included in the regulation on excessive imbalances, according to which national systems of wage bargaining need to be fully respected. "The ETUC will use this safeguard in a systematic way against any attempt to interfere in national wage formation systems, to promote decentralised and uncoordinated bargaining."

Jean-Claude Trichet, President of the European Central Bank (ECB), had congratulated Parliament negotiators a week earlier for resisting attempts to water down the package: "If I compare the deal to the initial proposals, there is substantial improvement. I have to pay homage to the Parliament for this," he said.