The EU should impose economic sanctions on countries which are caught breaking budget deficit rules but political sanctions, such as a suspension of voting rights, are a step too far, argues Carl Haglund, a Finnish MEP in charge of the European Parliament's report on the reformed Stability and Growth Pact.
Carl Haglund MEP (Alliance of Liberals and Democrats for Europe, Finland) is the rapporteur of a draft proposal to clean up macroeconomic imbalances in the euro area. The proposal is just one of six in a larger package on economic governance.
He was speaking to EURACTIV France's Loup Besmond de Senneville.
You are responsible for a report on macroeconomic deficits in the euro area. What are your main conclusions?
It is important that the package of economic governance include a component including sanctions, if a state refuses to make necessary reforms and correct actions when he is faced with imbalances. It is a question of credibility.
How do these macro-economic imbalances pose a danger?
We saw it in Ireland or Spain: they can affect the entire economy of the euro zone. The idea is obviously that each state acts for itself when an imbalance is identified. Ideally, we should not need sanctions. But if a country refuses to act, sanctions are important for credibility and for strengthening the current system.
What types of penalties should be applied?
The economic sanctions between 0.1 and 0.5% of GDP are quite large fines but if they are too small, they have no effect.
Your report does not mention any possible political sanctions. Why?
This report is based on proposals from the Commission, which functions under the Treaty of Lisbon. It is impossible to impose political sanctions with the treaty. If you want to put in place a credible system this year, you have to do it with the current treaty.
Furthermore, I am not advocating that sanctions such as suspension of voting rights or suspension of grants under cohesion policy are implemented. If Greece and Ireland had been subject to such sanctions, would we have avoided the crisis?
We must remember that this is not to punish states that already have problems because you will only make the situation even more difficult.
This sanction is aimed more at countries like Finland, Poland, Germany or the Netherlands if, for example, they began to show signs of weakness that could lead to an even bigger problem.
Ireland has long been called the 'Celtic Tiger'. Then a few years ago, the economy of this country showed worrying signs. We could have acted then. The Commission could have required Ireland to change some of its policies or face sanctions.
What do you think of the competitiveness pact proposed by France and Germany?
Overall the content is good. On a macroeconomic level, it identifies real problems, such as when we reach retirement age.
But the procedure they used is terrible. Firstly, I do not like the old culture that two big member states think they can agree on one point and simply inform the other Member States. The European Union has 27 countries.
We should rely on the 'Community method' and the Treaty of Lisbon. Some European leaders, in the Council, apparently regret the Lisbon Treaty, which gave the Parliament power they no longer want.
What France, Germany and other countries in the Council are doing is very bad for democracy in Europe. It is irresponsible.