Member states warn EU fiscal supervision ‘inadequate’

José Luis Escrivá [Airef/Flickr]

Rules to control national spending are “complex” and the current approach is “inadequate”, the chair of the EU Network of Independent Fiscal Institutions, José Luis Escrivá, said on Tuesday (31 January).

Speaking at the European Semester Conference in the European Parliament, he said that fiscal debates in the EU are “too often” limited to a discussion about “decimals of deviation” from the target, or the interpretation of the Ecofin Council recommendations about a member state.

“A model mainly based on strict EU rules and close EU surveillance of compliance with those rules has proven itself to be inadequate and insufficient either to prevent a severe fiscal crisis or to promote sound public finance,” said Escrivá, who is also the chair of Spain’s independent fiscal authority.

ECB attacks Commission's easing of fiscal rules

The European Central Bank has criticised the Commission’s easing of EU fiscal rules as “counter-productive”, in its latest economic bulletin published Monday (2 November).

In a panel debate with European Commission Vice-President for the euro, Valdis Dombrovskis, he stressed that national supervisors believe “a more medium-term orientation is badly needed”.

In this context, he called for increasing ownership of fiscal commitments, in line with similar calls made by the executive and the Ecofin Council in the past.

In order to minimise the risk of a new crisis, the EU added thousands of pages of new legislation and agreements in order to control member states’ spending and economic imbalances.

But the new legal framework has proved too convoluted and is barely followed by the national capitals and their legislators.

Commission split on credibility of rules as Spain and Portugal get ‘pardon’

A strong group of commissioners was in favour on Wednesday (27 July) of imposing at least a symbolic fine on Spain and Portugal for breaching the Stability and Growth Pact, but Jean-Claude Juncker opted for a zero penalty – supported by German Finance Minister Wolfgang Schauble.

The Juncker Commission led an effort to simplify the procedure, the European Semester. But further simplification is still needed, national authorities stated.

“Despite ongoing efforts to simplify EU fiscal rules, they continue to be based on complex analytical tools, procedures and interpretation agreements,” Escrivá said.

He emphasised the important role played by national institutions and parliaments in fiscal surveillance, in order to avoid the perception that the rules are imposed by Brussels.

His comments came the day after the IMF called for an overhaul of the EU fiscal regulations.

The Washington-based bank pointed out that compliance with the fiscal framework remains poor. It also proposed a review of the sanction system and new incentives to increase national governments’ compliance.

The Commission’s handling of its fiscal oversight has been criticised by big member states, including Germany and the Netherlands.

Commission defends role as sole guardian of fiscal discipline

Amid growing concerns in Berlin, Frankfurt and The Hague about flexible interpretations of the Stability and Growth Pact, the European Commission ruled out the possibility of transfering the assessment of national budgets to an independent external body.

The German government proposed transferring these powers to a different entity in order to avoid political interference when it comes to budgetary decisions.

Meanwhile, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem attacked the executive’s verdict on member states like France, and its proposal for a fiscal stance for the eurozone.

Dijsselbloem tells Commission to focus on budget discipline

Eurogroup President Jeroen Dijsselbloem on Tuesday (29 November) joined critics of the European Commission’s recent call for fiscal stimulus at eurozone level.

In order to gain some credibility in the implementation of the budgetary rules, the EU set up an independent fiscal board. But its powers were diluted, it was embedded in the Commission and its resources were limited.

But the board lost no time and questioned the Commission’s assessment of the eurozone’s fiscal state.

European Fiscal Board chief: Commission's analysis 'made a bit too quickly'

The new European Fiscal Board began working just as the European Commission took the unprecedented step of proposing a fiscal target for the eurozone. The Board’s chief, Niels Thygesen told that the Commission should have done “more analysis” before proposing an expansionist stance.

Originally, the EU fiscal board was also tasked with coordinating between national fiscal authorities.

But the national bodies argued that this would go against the goal of increasing national ownership of fiscal decisions. Following the setting up of the network of national supervisors, the EU fiscal authority partnered with its national counterparts.

According to the so-called two-pack legislation on budgetary control , eurozone countries should have in place an independent body, such as a fiscal council, which is in charge of monitoring compliance with numerical fiscal rules and, where appropriate, assessing the need to activate the correction mechanism foreseen under the Fiscal Compact. Moreover, macroeconomic projections should be produced or endorsed by an independent body, although this does not necessarily have to be the fiscal council. The deadline for setting up a fiscal council was October 2013.

To date, all EU countries except Poland and the Czech Republic have an independent fiscal council.

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