Eurogroup President Jeroen Dijsselbloem on Tuesday (29 November) joined critics of the European Commission’s recent call for fiscal stimulus at eurozone level.
Speaking before the European Parliament’s committee on Economic and Monetary Affairs, Dijsselbloem, who is also the Netherlands’ finance minister, stressed that the role of the executive is to enforce the Stability and Growth Pact, the EU’s rules to control member state spending.
“Between the recommendation on fiscal expansion and upholding the rules on the fiscal trajectory that come from the pact, there is some tension,” Dijsselbloem said.
“They can’t both be true. The first responsibility of the Commission is to uphold the pact,” he told MEPs
Last November, the European Commission proposed a timid fiscal push for the 19-member bloc of 0.5% of the GDP (around €50 billion).
The European Commission stepped up its efforts to leave austerity behind on Wednesday (16 November) by advocating for the first time a timid expansionary fiscal policy for the eurozone and forgiving Spain and Portugal for breaching EU budget rules.
The proposal came against the backdrop of political instability and social unrest in Europe.
“There is both a need and a window of opportunity to act on the fiscal front at this precise juncture, also to rebalance the overall policy mix of the euro area,” the Commission wrote in the communication.
Eurozone finance ministers are expected to discuss this topic during its next meeting on 5 December.
The Dutch minister’s criticism is in line with the comments made by his German colleague, Wolfgang Schäuble, who also disregarded the executive’s call for more spending.
The German minister warned that the executive is acting “politically” and “beyond its mandate”.
Berlin is one of the only countries that could increase its spending on the European economy. But Schäuble pointed out that Germany led investment in the eurozone over the last decade.
Germany has scope to cut taxes by around €15 billion after the country’s federal election in September 2017 despite increased spending on migrants, Finance Minister Wolfgang Schäuble said today (6 September).
As part of the strategy to revive the European economy, the executive is also pushing to extend the firepower and the deadline of the European Fund for Strategic Investments (EFSI), known as the Juncker Plan.
The European Commission’s goal is to mobilise at least 500 billion in investment by 2020, mostly by using private funds. It urged EU finance ministers (Ecofin Council) to make a decision about the extension on 6 December.
The Commission believes that the flaws spotted by independent evaluations following the first year of the Juncker Plan were addressed in the review proposal put forward last September.
The EU Court of Auditors and EY, a consultancy firm, questioned the added value of the project and called for better coordination between EFSI funds and other EU envelopes.
The added value of the investment plan for Europe was questioned once again on Monday (14 November) as an independent report warned that “concerns” remain about its additionality and “possible crowding out” of existing investment.
European Commission Vice-President Jyrki Katainen told Reuters in an interview the project “crowded in” private money to Europe. He estimated that the initial €315 billion, three-year EFSI programme could create some 1.2 million jobs.
According to his estimates, EFSI has mobilised an estmated €154 billion in total investment and support for almost 380,000 SMEs.