Business World

Monday 19 February 2018

Call to strip EU Commission of enforcement role on budgets

German Finance Minister Wolfgang Schaeuble. Photo: Virginia Mayo/AP Photo
German Finance Minister Wolfgang Schaeuble. Photo: Virginia Mayo/AP Photo

Tatiana Jancarikova

Germany's finance minister has proposed shifting some of the task of enforcing Eurozone budget rules away from the European Commission, which has repeatedly given way to governments' pleas to be allowed to break fiscal limits.

Wolfgang Schaeuble said the commission's "political" nature made it difficult to impose compliance on governments - and that the job of enforcement should be instead partly handed to the European Stability Mechanism, the Eurozone bailout fund.

Germany, and especially Schaeuble himself, have shown long-term frustration with the commission's leniency towards France, which has been in breach of the rules for years, as well as Spain, Italy and Portugal.

The EU body has repeatedly backed away from imposing tough sanctions on governments.

"Normally, implementation is the job of the European Commission. The current Commission has chosen to be more political and it has every right to do so," Schaeuble told a conference in Bratislava. "But this makes it more difficult to impose compliance," he said.

"Perhaps the European Stability Mechanism could play a role in partial compliance in those cases where the Commission can't."

EU Economic and Financial Affairs Commissioner Pierre Moscovici, sitting on the same panel, disputed Schaeuble's idea.

He said the commission had a democratic mandate, given its relation to the European governments and the European Parliament, delivered results and took its decisions in accordance with existing rules.

"I think this should still be in the commission," Moscovici said. "I think we are getting better equipped with the fact that we will have a European fiscal board which will advise us and that will be established by next week."

EU countries are supposed to keep budget deficits below 3pc of gross domestic product and limit debt to 60pc of GDP.

Moscovici said the Commission had been effective in reducing average budget gaps across the Eurozone in recent years.

It was also better placed to be flexible in dealing with the specific circumstances of individual countries than a purely technical body like the ESM, he said.

"It's clear we need to take into account some circumstances, structural reforms, investment, natural phenomena, earthquakes, fight against terrorism, all the work, and integration of refugees," Moscovici said.

"This explains why the EU fiscal rules pact is no more a rigid, stupid, pro-cyclical tool. It has become much more subtle and intelligent - but I think we always need flexibility."


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