Paolo Gentiloni won the European Parliament’s approval on Thursday (3 October) to become EU Commissioner for the Economy, with ambitious plans to unblock tax proposals and to design the European unemployment reinsurance scheme.
Speaking to the members of the European Parliament’s Economic and Monetary Affairs, Employment and Budgetary Affairs committees, the former Italian prime minister insisted on his “ambitious” stance to face the multiple challenges ahead, including the slowdown of the EU’s economy.
Following his grilling, a rare consensus emerged among the largest parties, who praised his programme, in contrast with the bumpy hearings process seen over the past days in Parliament.
Gentiloni, a member of Partito Democratico (S&D), recommended countries with fiscal space, including Germany, to invest more to progress on the “green” and “technological” transformation.
The monetary stimulus, so far the primary response to counter the risk of recession in the eurozone, “is not sufficient” he told MEPs on various occasions.
But the former Italian minister also called for budgetary discipline where needed. Moreover, he stated that, if he is confirmed by the Parliament, “I will focus on public debt reduction”.
One of his first tasks will be to validate the Italian budget for 2020. The draft plan submitted by Rome slightly surpassed the 2% of GDP deficit target, agreed with Brussels to reduce Italy’s massive public debt (132% of GDP).
His nationality did not come up as a major issue for the MEPs, nor his alleged conflicts of interests, after the Italian sold the Amazon stocks he had.
After the hearing, a majority of political groups approved his candidacy with a “broad consensus”, according to Irene Tinagli, the chair of the Parliament’s ECON committee, and a fellow PD member.
“It is clear that Paolo Gentiloni is an experienced politician. Although we regret the vagueness of his answers, we can approve him, all things considered,” said Markus Ferber, EPP Group spokesman for ECON.
“Gentiloni demonstrated the values, experience and ability to successfully carry out his assignment as commissioner for Economics,” Renew Europe coordinator in the same committe, Luis Garicano, told EURACTIV.
“We have established a very good relationship, and I have high hopes for your work in this legislature,” he added, welcoming his “clear commitment” to introduce a European unemployment reinsurance scheme.
MEP Sven Giegold, financial and economic policy spokesperson for the Greens, acknowledged Gentiloni’s commitment on the tax front.
“Gentiloni has credibly stated that he is personally dedicated to continuing the EU Commission’s tax agenda. It is good for Europe that the fight against tax dumping continues,” Giegold said.
For Manon Aubry, ECON coordinator for the leftist GUE/NGL group, his hearing was “relatively weak”, especially on tax justice issues.
“He only gave vague answers but no firm commitment to review the list of tax havens or to tackle harmful tax practices,” she told EURACTIV.
Gentiloni highlighted the importance of “cooperation” and “reciprocal trust” among member states over the next years, given the initiatives that he will need to put forward.
Here are some of the issues discussed during the hearing.
Asked on various occasions about how he will deal with the Italian budget, Gentiloni stressed that there won’t be any favoritism.
“I want to be clear: I will not be the representative of a government. I will be the commissioner for Economic Affairs.”
Given the benign treatment Rome received over its public spending, he said his “personal commitment” will be that “there won’t be any double standards towards any country”.
He recalled how he defended the EU’s fiscal rules, even when they weren’t very popular in his country given the expenditure control it imposed.
The commissioner designate said the budgetary instrument for convergence and competitiveness needs to be “seriously funded”. He added that the stabilisation function, so far excluded given the opposition of a group of countries, should be considered.
In this context, he committed to undertaking a “serious follow-up” of the instrument.
He also said that the climate criteria will be taken into account in in the implementation of the budgetary instrument.
Unemployment reinsurance scheme
This instrument is one of the flagship initiatives of Ursula Von der Leyen’s Commission, and one of the trickiest proposals for Gentiloni.
He said the future tool won’t be based on permanent transfers or weaken structural reforms, and won’t provide automatic disbursements. He added that it should focus on significant external shocks.
One of his first tasks once he takes over will be to design this new fiscal instrument. “This discussion is very relevant”, he told MEPs. He promised that he will work on this “very quickly”, and intends to come up with proposals by the end of this year.
The two options on the table to design the scheme are loans and direct support to national budgets.
Given the current context of low interest rates, he explained that loans represent a “weaker” tool but could be adopted faster, while offering direct support to national budgets would be “more complicated”.
But he insisted that “we should be ambitious, also on this subject”. Both options aren’t necessarily contradictory, he added, saying it was possible to start with one and continue with another.
Stability and Growth Pact review
On this issue, which is currently under discussion among member states, Gentiloni promised an “ambitious approach” to achieve more enforceable rules, which are also better designed to support countries in bad times. He intends to come up with ideas by the end of this year.
Gentiloni defended a proper review of the EU’s fiscal rules. But he was aware of those who don’t want to open up the Pandora’s box of a process that nobody knows how it could end, given the member states’ diverging positions.
Against this backdrop, Gentiloni reminded that the SGP will not solve all the problems the eurozone is facing, and added that “we need to be very selective in identifying the priorities.”
One of the areas on which he would like to focus on is debt reduction. He admitted that the SGP has not been very successful on this front.
The former Italian Prime Minister promised that he would not tolerate the current stalemate on EU tax initiatives, saying there was growing public awareness about the importance of these matters.
For that reason, he promised that he will recommend majority voting for some proposals, although he noted the legal and political difficulties of breaking the unanimity rule. Indeed, he introduction of “passarelle clauses” to introduce majority voting in certain areas also needs to be adopted by consensus.
On the digital tax, Gentiloni told MEPs that he was “rather optimistic” about reaching an agreement at international level next year. If that was not the case, he said he will start working on a new EU proposal in autumn next year.
The Italian candidate also stressed that the common consolidated corporate tax base (CCCTB) will be an “absolute priority” during his mandate. This proposal, which has been on the table for years, is seen as key to fight against aggressive tax in some EU countries.
“We cannot continue with this internal competition among the member states,” he said.
He added that he would not wait and will put forward new ideas to unblock the proposal at the council table.
“We are going to work on this and we are going to find solutions,” he said.
In regards to the fight against tax havens, he admitted that “more needs to be done”. But he told MEPs that they should acknowledge the progress made, including the approval of blacklists of uncooperative jurisdictions. He argued that the impact of the blacklists is “significant”, even if they are considered only as a “soft” instrument.