No cure in sight for ailing Stability Pact

Greater flexibility was the tenor of Commissioner Joaquin Almunia's comments during a press conference (24 June) on the Commission's Public Finance Report Communication. The Economic and Monetary Affairs Commissioner raised five main points concerning the Stability and Growth Pact. He said there was a need:

• for more focus on debt and sustainability
• to create more incentives for fiscal consolidation during periods of economic growth
• to take into account country-specific circumstances when defining the medium term budgetary objectives [more margin of manoeuvre on deficit for countries with low debt and sustainable public finances]
• to take more into account economic developments when formulating recommendations to correct 'excessive deficit' situations

He indicated that now was not the right time to unveil detailed proposals on the Stability and Growth Pact, which appear unlikely to emerge before the new Commission takes office in the autumn. One idea he floated was that EU level co-ordination be focussed on the first semester of the year (instead of spreading it throughout the year as is the case now) to give an incentive to national Parliaments to take European policy considerations more into account and thereby take more "political ownership" for EU co-ordinated decisions such as the Broad Economic Policy Guidelines.

Greece has also now joined the growing number of eurozone countries in violation of the pact. The pact has been a lame duck ever since finance ministers backed Germany and France in their challenge to the EU's disciplinary rules on budget spending on 25 November 2003 (see

). The Commission is now awaiting a ruling on a legal challenge against the decision of the EU Council of Ministers (see ).