The document reflects a balance of conflicting interests, strongly sought by the eurozone’s Mediterranean countries to offset the pro-austerity Fiscal Compact adopted at the EU Summit in March.
As a sign that German influence is far from waning, the new compact underlines that EU member states should remain attentive to balance their accounts.
They should pursue “differentiated growth-friendly fiscal consolidation, preserving investment into future-oriented areas directly related to the economy's growth potential and ensuring the sustainability of pension systems,” reads the compact which is annexed to the conclusions of the summit.
It is not clear whether it will require a ratification process, or, as it is more likely, will simply be a declaration of intents without real obligations.
“Restoring lending to the economy” is the second recipe suggested to spur growth, as many states are facing a new credit crunch due to the poor state of the banking sector.
Speeding up the liberalisation of markets, promoting jobs and modernising public administrations are the other three key priorities listed in the compact.
The EU contribution
The growth compact includes all the financial measures that have been aired in recent months to help restore economic growth, but does not go any further.
It calls for a €10-billion capital increase for the European Investment Bank. This should lead to a parallel increase of “its overall lending capacity by €60 billion, and thus unlock up to €180 billion of additional investment,” reads the document, confirming earlier announcements.
The new measures should be in force by the end of the year.
Project bonds to support investment in infrastructure should be “immediately” stocked with €4.5 billion, says the document.
Moreover, the draft suggests using EU structural funds “to provide loan guarantees for knowledge and skills, resource efficiency, strategic infrastructure and access to finance for small and medium enterprises.”
But the pact is mostly void of new ideas. It does not make any reference to excluding certain infrastructure investments from deficit calculations, which could inject fresh money into the economy without further burdening public accounts. The idea has been backed by Italian Prime Minister Mario Monti.
Bolder ideas to help member states get their accounts in order, and therefore concentrate on growth, are also sidelined. No mention is made of the possible partial mutualisation of debt or the direct financing of ailing banks with EU rescue funds.
However, these ideas could be included in proposals prepared by European Commission President José Manuel Barroso, European Council President Herman Van Rompuy, European Central Bank chief Mario Draghi and Eurogroup leader Jean-Claude Juncker. These proposals are to be submitted to EU leaders, as already reported by EurAcitv.
Employment at the core
The new compact focuses also on employment. The pact repeats Commission’s proposals included in ‘the employment package’ published in April.
It encourages labour mobility and youth employment, but falls short of adding precise means to improve the current bleak environment for job-seekers. Youth unemployment stands at over 22% in the eurozone.
The new pact suggests that the EURES portal, which is an online meeting point for job seekers and employers, “should be developed into a true European placement and recruitment tool,” considering “the possibility of extending it to apprenticeships and traineeships should be examined.”
The number of regulated professions should also be lowered, in a bid to favour the access to the job market for youth and long-term unemployed, the document says.