Tag: stability and growth pact

Eurozone economies are set to grow by 1.9% in 2006, says the Commission. But will it be enough to help EU countries meet the rules of the reformed Stability and Growth Pact?

EU member states have scolded Hungary for missing its 2005 deficit target "by a sizeable margin" and for deciding not to take corrective action in line with previous government commitments.

Monetary Affairs Commissioner Joaquín Almunia has accused member states of applying tricks learnt from the corporate sphere to hide deficits in breach of the Stability and Growth Pact.

With a 3.1% deficit/GDP ratio, the UK has broken the EU's budget deficit ceiling for the second year running in 2004-05 and will do so again in 2005-06 and 2006-07, says a Commission report.

Current developments in the design and management of fiscal rules in the European Union may have negative implications for new member states, says Fabrizio Coricelli in a paper published by the Center for Social and Economic Research (CASE). Loosening of the Stability and Growth Pact (SGP) and a growing degree of arbitrariness in its implementation reduce incentives for fiscal adjustment in New Member States, adjustment that would be crucial during the transition to the Eurozone. High budget deficits may prove a serious obstacle in the process of catching up of New Member States to the income levels of EU-15 countries.

Italy's finances will be closely watched by EU observers as it strives to meet the rules of the Stability and Growth Pact. Some observers are sceptical about how much the measures undertaken will achieve.

Although the Commission is positive about Germany's efforts to meet the rules of the reformed Stability and Growth Pact, the country's finances are set to come under the Commission microscope in September.

The Commission has recommended giving Italy until 2007 to bring its deficit below the 3% limit. The excessive deficit procedure is unenforceable in practice, says an economist from a Brussels-based think tank.

Through a report on Italy's public finances, the Commission has taken the first steps towards launching an 'excessive deficit procedure' against a country facing projected deficits above 3% in 2005 and 2006.

The French referendum result has led to the euro slipping to its lowest level against the dollar in seven months but still much higher than when it was first introduced.

The Commission will be launching an excessive deficit procedure against Italy in the coming weeks. Portugal is likely to be in hot water too after announcing a 6.83% deficit/GDP ratio for 2005.

UK Prime Minister Tony Blair has effectively ruled out Britain joining the euro until 2010 at the earliest. His comments come during a British general election campaign in which European debate has been markedly absent.

The revised Stability and Growth Pact, which was agreed by EU leaders at the Spring summit, now moves to the European Parliament. The Commission aims for it to be finalised before the end of June.

The Commission's pessimistic forecasts for the Italian economy will soon give the Commission a chance to show the sceptics that the Stability and Growth Pact is not dead. 

This paper, by Jacek Rostowski, has been prepared for the international conference entitled "Europe after the enlargement", to be hosted by the Center for Social and Economic Research (CASE) in Warsaw on 8-9 April.

Following marathon talks among eurozone and non-eurozone member states, an exhausted EcoFin chairman Jean-Claude Juncker has indicated that no reform is better than a bad reform. EurActiv looks at the core issues.

The chairman of EcoFin Jean-Claude Juncker is confident of agreement despite differences between France and Germany on the one hand and a coalition of smaller member states on the other.

Abandon the annual budget deficit criterion and focus instead on medium-term targets for public debt, argues Charles Wyplosz in the Financial Times.

Granting special treatment to particular items of spending, defining 'good economic times' and redefining what is an economic recession are some key issues being debated in the upcoming reforms of the Stability and Growth Pact.

The Commission has lifted the excessive deficit procedure, first launched in 2003, against France and Germany. But already there are doubts about Germany respecting the rules in 2005.

Europe must develop a specific 'knowledge for growth pact' to reinforce the knowledge triangle: education, research and innovation, says Commissioner Potočnik.

The 3% deficit and 60% debt criteria will not be touched in the review of the Stability and Growth Pact but greater emphasis on public debts may hurt countries such as Italy.

A Commission proposal on whether or not to suspend 'excessive deficit procedures' against France and Germany is due in mid-December. France appears likely to get off the hook while the German case is harder to predict.

Jean-Claude Trichet has urged governments to reinforce their efforts to obide by the Stability and Growth Pact or face higher interest rates, which would dampen growth and employment in Europe.