Lawmakers near breakthrough on economic ‘six-pack’

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The European Parliament is getting closer to a breakthrough on the 'six-pack' of economic governance legislation, Guy Verhofstadt, leader of the liberal ALDE group, told Brussels journalists yesterday (7 September).

Verhofstadt said a compromise had been reached between the Parliament's political groups on how countries will police each other's public debt in the future.

"What is important is that from now on, the Commission will be in the drivers' seat, and that only a reversed majority – qualified or simple – can block [its recommendations]," Verhofstadt explained.

"If a member state is not following the Commission's recommendations, the EU executive can take action," he said.

Specifically, qualified majority voting would apply in the corrective arm of the reformed Stability and Growth Pact, which limits public debt and deficits to 60% and 3% of GDP respectively. Simple majority voting would apply in the preventive arm, he said.

MEPs tabled over 2,000 amendments to the Commission's six legislative proposals. The main points are:

  • Strengthening the Commission's role in policing public debt and deficits vis-à-vis the member states, which should have less room for manoeuvre.
  • Countries caught cooking their accounts (reporting false statistics on debt, etc.) should face a fine of 0.5% of GDP. 
  • Sanctions for failing to take action on macroeconomic imbalances (0.1% GDP) should kick in earlier, at the first failure to respect recommendations; if failure is persistent, a fine could be increased to 0.3% of GDP.
  • Council votes on imposing deposits and fines should be held in public, except in crisis situations, when decisions can be taken behind closed doors.

However, outstanding issues still remain. "It is still necessary to clearly define how the voting procedures to get to sanctions will work and also on other issues of the package, such as the hearings in the EP [European Parliament] of finance ministers and the need to also address countries running trade surpluses rather than only those with deficits," the Parliament said in a statement.

Progress on Eurobonds

Asked by EURACTIV if he thought discussions on introducing Eurobonds were gaining momentum, Verhofstadt answered positively, saying that "markets are asking for that".

The Commission will unveil a Green Paper on Eurobonds as part of its economic governance package, most likely in October.

"It is impossible for the European Central Bank [ECB] to continue doing what it is doing now," he said, referring to indebted eurozone countries' bond buying, which he said had probably reached the level of €130 billion.

"Some may say the ECB is doing that because the EFSF [European Financial Stability Facility] is not yet in place, but the EFSF has its limits, because it is an intergovernmental system. We hear of Finland, yesterday it was Slovakia, tomorrow another country. We feel that for the future, we shall need a more consistent system," he said.

What financial markets are asking for is stability, and for them, stability can only be restored by creating a Eurobond market, he insisted.

'Resetting Greece'

Verhofstadt, who appeared alongside Dora Bakoyannis, a former foreign minister of Greece who is now leader of the Democratic Alliance for Greece, a small liberal party, spoke about the need to "reset Greece" by putting in place an agenda for growth.

Bakoyannis claimed that there was so much austerity being imposed on Greece that the real economy was "dying out".

She asked for "very concrete" EU support and advocated a European flat-rate corporate tax of 20%. At present, the corporate tax rate in Greece is 40% and Greek investors are moving their business to Bulgaria, where the corporate tax rate is 10%, she said.

Jorgo Chartzimarkakis, a German liberal MEP of Greek descent, called for major decisions to be taken, such as moving the Desertec energy project from North Africa to Greece, which he said had the potential to produce as much solar power. He also spoke of Greece becoming a production centre for photovoltaic equipment and for spearheading CO2-free hotels.

MEP Theordoros Skylakakis of the Democratic Alliance, who by defecting from New Democracy became the only Greek liberal MEP in the European Parliament, called on the EU to assist with moving one million Greeks from the public sector to the productive economy.

The real reason for the eurozone crisis is not Greece, but the fact that the architecture of the euro zone did not work, various speakers claimed.

The six-pack of economic reforms aims to strengthen the EU's Stability and Growth Pact in order to prevent the kind of budget gaps that are currently sinking the euro.

Four of the proposals aim to strengthen budgetary surveillance, while the remaining two focus on monitoring and controlling macro-economic imbalances within the EU.

But the package has come to a standstill as France refuses to cede more power to the European Commission. Meanwhile, the European Parliament wants to make it harder for indebted countries to sideline the Commission's advice.

The row revolves around Reverse Qualified Majority Voting (RQMV), which France refuses to accept for fear of losing control over its fiscal sovereignty. But the European Parliament insists that history – meaning the debt crisis – will repeat itself if countries are left to decide on their own.

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