The ECB issued a strong warning to the EU institutions on Friday (9 September) about the “long-term consequences” of poor implementation of the fiscal rules, in the aftermath of the partial pardons given to Spain and Portugal, after they missed their deficit targets.
Speaking after the informal Eurogroup meeting held in Bratislava, Benoit Coeuré, a member of the ECB’s Executive Board, insisted that the Stability and Growth Pact must be implemented “in a transparent, consistent and predictable” manner. Otherwise, the institutions would put the whole fiscal framework “at risk”, he warned.
Although Coeuré said that he was not commenting about Spanish and Portuguese cases, he was confident that the Commission and the Council would decide “the right way”. Otherwise, there could be “long-term consequences” for the EU rulebook.
If rules are not applied in a transparent, consistent, and predictable way, “it would make it more difficult to move to a deeper fiscal union”, he insisted.
It is not the first time that the ECB aired its criticism of the European Commission’s efforts to introduce further flexibility in the interpretation of the Stability and Growth Pact.
But Coeuré’s comments came against the backdrop of member states’ discussion about how to deal with Spain.
The country was found in breach of the fiscal rules, as Madrid did not take “effective action” to cut the deficit below the 3% of GDP threshold.
The Spanish government recently confirmed that it would not submit corrective measures by 15 October as requested by the EU institutions due to the political stalemate in the country.
As a result, the country faces a fine of 0.5% of its GDP (around €5 billion) and the freeze of €1.1 billion in structural funds.
The issue was discussed during the Eurogroup meeting on 9 September.
If Spain’s acting government fails to adopt the tax increases and cuts, at least “it is important to have a draft budget on the basis of no policy change”, said Commissioner for Economic Affairs Pierre Moscovici, during the same press conference.
The French Commissioner said that Spain’s acting Economic Affairs Minister, Luis de Guindos, “committed himself” to adopt “the necessary fiscal measures” to meet the deficit targets set by the EU.
Spain has to cut its last year’s deficit from 5.1% to 2.2% in 2018, according to the extended calendar given to the country this summer.
Moscovici also fired back against those who criticised the executive’s verdict on Spain and Portugal.
The European Commission was under fire after German Finance Minister, Wolfgang Schauble called President Jean-Claude Juncker to “pardon” any fine against Madrid or Lisbon, overruling the opinion of its vice-presidents.
“The decision was made without any kind of pressure by any government” but of course “in dialogue” with the governments, he said. “We acted independently,” Juncker stressed.
“I am fed up with this kind of accusations against the Commission,” the president of the executive complained, as he warned that such criticisms help inspire populism in Europe.
Juncker recalled that, despite the fact that Commission made the proposal, it was the Council who unanimously adopted its recommendation not to fine Spain and Portugal.
“The European Commission is not perfect, but it is an institution like the other institutions”, he told reporters. “We have a rule-based system,” he commented.
Eurogroup President Jeroen Dijsselbloem said he was the “greatest supporter” of the Commission, as he emphasised the need of having an “independent referee”. But while he called on all players to protect that role for the European Commission, he also said that “we have to make sure that we all stick to the rules”.