The main principles of the agreement consist of four pillars which would, according to Joaquin Almunia, EU commissioner for economic and monetary affairs, be in tune with the framework agreed at last week's G20 summit in Pittsburgh.
The EU's exit strategy would broadly consist of a "timely" withdrawal from stimulus, structural and fiscal consolidation at or above 0.5% a year, labour market reforms, boosting long term investment and strengthening national budgetary frameworks, Swedish Finance Minister Anders Borg said yesterday at an informal meeting of EU finance ministers in Gothenburg.
The timing of the exit strategy's implementation is, according to Almunia and Borg, at the discretion of each national government. Some countries such as Spain, the UK and Germany have already begun cutting public spending, which some observers argue is completely out of step with a coordinated exit strategy (EurActiv 17/09/09).
However, Borg said, the agreements reached were in line with those aired by UK Finance Minister Alistair Darling during yesterday's discussions.
Exit by 2011 still uncertain
The European Commission is seeking to set a date for exit strategies by 2011 provided its latest forecast shows a return to positive growth. "Our compass is price stability in the medium term," Almunia said.
The current indicator for potential growth is at around 1%, but will be defined by new information provided by the member states for the Commission's 2010-2011 forecast next month, Almunia stressed.
According to the commissioner, the recovery will be detectable when growth estimates are in line with potential growth expectations without the help of stimulus measures but fuelled by normal drivers, like demand from consumption and investment.
Onlookers are sceptical about how this scenario will play out given some countries seem to be pursuing their own economic agenda. Borg said there was "no disagreement or vigorous debate on the issue of timing," and said leaders had conceived "a broad common language".
Discussions due to take place in December would clarify the details and timing of exit strategies, Eurogroup chair Jean-Claude Juncker said.
Employment key structural reform
Almunia said he had also asked ministers to ensure that their next steps would synchronise structural reforms and fiscal policy.
Under structural reforms, he stressed that the circumstances for gaining employment in EU countries must be improved.
The improvement of training and job search facilities and a mechanism to avoid pre-retirement schemes and limits on the retirement age were two measures mentioned by the Commissioner. "We must increase the possibilities of keeping the over-55s in work," he added.
Nine more countries in breach of Stability and Growth Pact
Twenty of the 27 EU countries - including 13 in the euro zone - are now operating above the 3% eurozone deficit threshold set by the Stability and Growth Pact.
The pact, conceived under the 1992 Maastricht Treaty, allows the Commission and the Council to monitor the fiscal health of member states that have adopted the euro.
Almunia insisted the pact was very much intact and its credibility is only in danger if it is not implemented.
"The pact has to be applied flexibly," Juncker added, stressing that in times of sluggish growth "one can be less stringent in complying to budgetary terms of the growth and stability pact".
Under the pact's terms, eleven excessive deficit procedures are currently running against member states. Almunia confirmed that the Commission would discuss reports regarding nine more countries that are in breach of the pact's deficit ceiling.
Germany, which in July forecast deficits would climb to about 6% of GDP in 2010, has earmarked a record 86 billion euros in net new borrowing next year. The EU will initiate disciplinary proceedings against the country in October, an EU diplomat said on Thursday.
The French government is also preparing to boost its deficit to 8.5% in 2010 (against 8.2% this year) and to postpone a balanced budget to 2015. Regional elections next year render it extremely unlikely that France will abandon extraordinary measures to ensure a return to economic growth by 2011.
