Employers’ federation: EU must ‘show the way’ on economic governance

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Rather than constituting an undemocratic interference, surveillance and sanctioning of national budgets at EU level is the only way to solve the bloc's economic ills, says Rudi Thomaes of the Federation of Enterprises in Belgium.

Rudi Thomaes is chief executive officer of the Federation of Enterprises in Belgium, the only multi-sector employer's organisation representing companies from all three regions of the country.

He was speaking to EURACTIV's Frédéric Simon.

To read a shortened version of this interview, please click here.

What was your reaction to the launch of the 'European semester' agreed upon at the last meeting of EU finance ministers?

We think that this is a positive thing. It gives European politicians the possibility both to have a better overall picture of national public finances and to keep them under control. The simultaneous introduction of the national budget strategy and the national reform programmes will assure a timely annual assessment of the member states' public finances and their competitiveness.

Do you think that this will be enough to prevent a repetition of the Greek crisis?

The proof of the pudding is in the eating. This means that it will all depend on the strict follow-up of the new principles of economic governance to be introduced. The Greek crisis demonstrated that Europe's entire economic future and financial stability is based on tough fiscal discipline in every member state, combined with a strong coordination of their economic policies. In this way, we can consider today that it was a big mistake to soften the Stability and Growth Pact in 2005, because underlying imbalances were ignored.

Let's imagine that another country starts breaking its deficit limit in the coming years. Are you confident that this new European semester will have enough early-warning signals to oblige those governments to get the deficits back to normal?

Early-warning signals are one thing, effective reaction to the early-warning signals is another thing. I think that the path to keep is to strengthen the follow-up measures and sanctions of the Stability and Growth Pact. As Mr. Van Rompuy wishes, the EU should have a pact capable of deploying effective measures both in terms of prevention and cure.

How would that work in practice? The Commission has proposed putting in place interest-bearing deposits for member states when their economies are going through good periods. Do you think that this is a good initiative?

I don't think we can express ourselves on this point at the moment as we need to see what is coming out of discussions. We agree with the recommendations agreed upon until now in the task force for economic governance, especially the alarm system and a way of controlling budgets before they are adopted by national parliaments.

In terms of compliance, you need more sanctions, including gradual ones. I also think that there is a need to have more reliable statistics on public finances. The events in springtime have showed that this is really a sine qua non condition in this regard.

Herman Van Rompuy has spoken in favour of automatic sanctions that would gradually be scaled-up. What kind of sanctions could these be?

I think the most important element in this set of sanctions is indeed the automatic character of its operation. If and when Europe decides to opt for a degree of automatism, than indeed a gradual scale-up would be appropriate. As for the nature of the sanctions, it is clearly more realistic to select sanctions which are already available in the Treaty rather than initiating new ones, which require a Treaty change.

What about treaty change? We've heard Angela Merkel saying countries which repeatedly break the Stability and Growth Pact should be allowed to be kicked out of the euro zone. Is this an option that you see favourably?

I understand Angela Merkel's concerns. She wants to make sure that the new measures do not remain dead letter. But, personally, I am afraid that a Treaty change would bring us a bridge too far and would mean another round of lengthy negotiations. Getting this Treaty adopted and ratified was already a big deal and there is a sense of urgency for a decision at the European summit of 29 October. With an effective economic governance package, I guess that no country will have to leave the euro zone.

So it was a good idea by the Commission to suggest broadening surveillance to macro-economic indicators such as labour productivity?

Yes, absolutely. You cannot set up a strong economic country surveillance system without a strong follow-up of the macroeconomic indicators of the EU member states. The identification of imbalances between member states and, as a consequence, the introduction of preventive as well as corrective mechanisms is of paramount importance.

Some see intervention at European level as breaching member states' sovereignty on economic policy. Do you think tightening surveillance at European level is good from a democratic viewpoint?

I don't have a problem with that. We believe that the pressure from Europe is needed. One should not neglect the impact of the economic policy in one European country on all the other member states. This justifies a balanced European approach.

We know that some countries like Germany, Spain and the UK have already taken very courageous measures. But others need a little bit more encouragement. With the submission of the national reform programmes in November, we will observe what others will do.

Without any doubt, labour market reforms, modernising social security, boosting innovation and tackling the ageing of our populations will have to be addressed.

In terms of public debt, Belgium ranks among the countries with the highest levels, at 100% of GDP. Would you accept it if the EU told Belgium to reduce its debt level?

Belgium will of course have to adopt measures to reduce its public deficit. We all know that Belgium needs to adopt measures exceeding 20 billion euro over the next few years to get its budget back on track. At the same time, we need to increase our competitiveness, as we are losing shares on the international market. Workers' costs are high and productivity should improve at a higher pace.

Whether through indicators or specific recommendations, I believe that Europe should indeed apply pressure to adopt growth-oriented policies and reforms.

All countries will have to tackle the problem of ageing populations. Belgium has proved in the past that it can reduce its deficit and its debt. In the beginning of the nineties, Belgium's debt was above 135% of GDP compared to a European average of 60%. Today it is indeed 100% compared to a European average of 85%.

However, it is crystal clear that our country needs as soon as possible structural reforms to improve its position in the EU and in the world. On a number of issues, a societal consensus is growing. The challenge is to carry through reforms sooner rather than later.

Are you concerned that ongoing government coalition talks in Belgium might slow down this process? Will you raise the alarm if talks drag on for too long?

Everybody in the country realises that a number of important decisions are being postponed. For instance, we still have no certainty about the future of nuclear energy in our country. A federal professional association, such as the FEB, should try to mitigate possible negative consequences of the political standstill, for instance through constructive social dialogue.

We at the FEB have confidence that our political leaders will act responsibly and deploy all efforts to find their way to a mutually acceptable compromise on the different subjects being discussed.

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