Delors backs competitiveness pact

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A few weeks after France and Germany tabled proposals for a competitiveness pact among eurozone countries, Jacques Delors supported their political move and backed rewards for good budgetary behaviour.

A paper, authored by the former president of the European Commission and published by Paris-based think-tank Notre Europe, evaluates the launch of the 'European Semester', or six months of economic and budgetary policy coordination between EU countries at the beginning of each year.

While welcoming the prospect of further budgetary coordination, Delors criticises the semester for not specifically addressing the stronger need for coordination among the 17 members of the euro zone.

The first European Semester was launched in January as a way to strengthen coordination of the economic and budgetary strategies of EU member states and avoid further debt-driven eurozone crises.

Each country must simultaneously submit its budgetary strategy in a Stability and Convergence Programme and its action in areas such as employment, research and social inclusion in a National Reform Programme.

Delors praises the controversial Franco-German 'Competitiveness Pact', presented in February, describing it as "a step in this direction, even if its content must be debated". His paper stresses that "major and persistent gaps in competitiveness – are seriously harmful to the euro".

The brief also criticises the European Commission's proposal to introduce automatic sanctions for countries that violate the stability pact. It argues that "it is not clear that the new sanctions are more convincing" and questions how they would interact with the euro zone's bailout mechanism, the European Financial Stability Facility.

Delors slams new proposals for economic governance for excessively relying on sanctions and surveillance, describing them as "cruelly lacking in incentives". He suggests the creation of "awards" allowing privileged access to EU research funds and infrastructure loans for "virtuous" countries.

According to the paper, a division of labour between member states and the EU in the face of economic difficulties should be envisaged. While EU countries should focus on fiscal consolidation, the EU institutions should focus on growth. For this purpose, Delors supports the creation of so-called 'eurobonds' for "funding pan-European infrastructure projects".

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