03 October 2013

EIM Budgetary September 2013

The debate about exactly how the 'Fiscal Compact' Treaty will work to involve national Parliaments with the EP may be a foretaste of the debates about how to promote 'ever closer eurozone union' while the UK remains outside!

EU technical experts cooked up a plan to change the definition of ‘structural deficit’ which would have eased the austerity on countries such as Spain, but senior officials soon became concerned about the ramifications so there will be no change ‘for the time being’. However, these details pale into insignificance when considering exactly how the ‘Fiscal Compact’ Treaty will work to involve national Parliaments with the European Parliament – an EU institution being used to operate the inter-governmental TSCG. This may be a foretaste of the debates about how to promote ‘ever closer eurozone union’ while the UK remains outside! 

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EU baulks at rule change that could ease austerity: Senior EU finance officials have declined to back a change in budget policies that could have lightened the burden of austerity on Spain and other crisis-hit countries. The change involves a new methodology as to how the Commission calculates the "structural deficit". The change was approved by technical experts at a meeting last week and was expected to be supported at a Tuesday meeting of more senior officials in Brussels. But that decision generated concern in some national capitals about its effects on budget policies, an EU official said. The new methodology will be sent back to the expert committee for further discussions, in an effort to understand what its impact will be on all 28 EU countries. The change involves a highly technical methodology that the European Commission uses to calculate the "structural deficit", which is the actual budget deficit adjusted for the strength of the economy. The Commission uses the structural deficit to determine how much austerity governments will need to undertake to meet EU budget targets. The new methodology would have attributed more of the deficit in some countries to the economic slump, rather than lax spending or too-low tax revenues. That would have benefited Spain and some other crisis-hit governments. Commission spokesman Simon O'Connor said that "the current methodology will continue to be used for the time being".

WSJ: Austerity seen easing with change to EU budget policy: European Commission finance officials have tentatively reached an agreement to adjust the way the 'structural deficit' of Eurozone countries is calculated. The change, tentatively approved Tuesday in Brussels, would apply to the next calculations made by the Commission in its autumn economic forecasts. It must still be formally approved by senior finance ministry officials at a meeting next week, though approval is likely, said Igor Lebrun, a Belgian official who chairs the group that drafted the changes.

CEPS/Mortensen: The EU’s economic policy architecture after ratification of the Fiscal Stability Treaty: Mortensen questions the extent to which the new inter-governmental agreement (Fiscal Stability Treaty) can be expected to solve the fundamental problem of consistency between budgetary and monetary policy. The only really significant innovation contained in the Fiscal Stability Treaty is, in fact, to assign responsibility to the CJEU to decide whether a Member State should be sanctioned for having an excessive deficit. In addition, however, the Treaty stipulates that where, on the basis of the Commission’s assessments, a country has failed to comply with its obligations, the "matter will be brought to the Court of Justice by one or more Contracting Parties". And where a Contracting Party, even independently of the Commission's report, considers that another Contracting Party has failed to comply with the provisions, it may also bring the matter to the CJEU.

The inter-governmental nature of the Fiscal Stability Treaty is also made evident by the fact that the Commission, despite its important role in the preparation of reports and conclusions as regards the existence of an excessive deficit, is not as such entitled to bring a case before the Court of Justice. However, as regards the Eurozone countries, Article 7 stipulates an "obligation" for the members to support the proposals or recommendations submitted by the European Commission where it considers that a Eurozone Member State is in breach of the deficit criterion in the excessive deficit procedure. This obligation, however, shall not apply if a qualified majority is opposed to the decision proposed or recommended.

Another issue, however, is the extent to which the Treaty, due to its inter-governmental nature, can be expected to entail a modification of the roles of the EU institutions and, notably, the role of the European Parliament. In this respect, Article 13 of the Treaty stipulates that the European Parliament and the national Parliaments of the "contracting parties" will together determine the organisation and promotion of a conference of representatives of the "relevant committees of the European Parliament and representatives of the relevant committees of national Parliaments in order to discuss budgetary policies and other issues covered by this Treaty".

In order to arrive at a balanced conclusion, the Court and the country concerned may need to call in experts from outside and it cannot be excluded that, in the end, the Court’s decision will not support the Commission’s views or those of the Contracting Party having brought the case before the Court. To arrive at a purely judicial definition of a "structural budget balance" and "special circumstances" might thus create a rather unique precedent. 

Lithuanian Presidency: Council of the EU presented 2014 budget priorities to the EP: The Council's high priority is given to programmes that encourage economic growth and job creation. The Council also aimed at ensuring the more efficient management of administrative costs and greater EU budget flexibility. “The EU budget for the financial year 2014 will play a crucial role in supporting growth and jobs. I am convinced that the Council's position represents the necessary balance between the financial capacity of Member States and the need to finance growth-oriented programmes. The economic situation in EU countries remains difficult, and national budgets are constrained. We must ensure the timely and appropriate implementation of EU budget programmes on the one hand, and at the same time limit deficits in the national budgets of EU Member States to the required levels”, Lithuanian Vice-Minister Algimantas Rimkūnas said after presenting the Council’s position. The Vice-Minister took positive note of the first budgetary trilogue on the EU budget, which took place last week in Brussels. The European Parliament and the Council agreed on high priority being given to programmes and actions supporting employment and growth. This is an important starting point for negotiations on the 2014 EU budget, which will take place in October and November 2013. 

The EU budget for the financial year 2014 will be the first annual budget under the new multiannual financial framework. The Council's position foresees €142.2 billion in commitments, and €135 billion in payments. Priority is given to youth employment, research, ERASMUS, SMEs and other programmes designed to ensure Europe’s sustainable growth and fight against unemployment.

European Parliament: Voting on MFF 2014-2020 postponed, conditions not met: Parliament's Budgets Committee has decided to postpone the consent vote to the EU's 2014-2020 budget regulation, the Multi-annual Financial Framework (MFF), initially scheduled for Wednesday. When the full Parliament will give the MFF its final blessing remains to be seen, as the conditions set out in its resolution of 3 July are still not met, says a statement issued on Tuesday by its three largest political groups, the EPP, S&D and ALDE. On 27 June, an agreement was struck at the highest political level on the MFF. The three groups now "urge the Presidency of the European Council and the Commission to make sure that this is respected by all parties in good faith". "The MFF agreement is a compromise, reached with leadership and commitment from all sides. It is very much needed by citizens and the Council must face up to its responsibilities and put it into effect, as Parliament is prepared to do", explains MFF rapporteur Ivailo Kalfin (S&D, BG). The June agreement also provided for the establishment of a high-level working group on EU "own resources", to put the modernisation of EU financing on the right track. Parliament insists that a decision must be taken on the mandate and membership of this group, which is to deliver a first assessment in 2014. The three political groups underline that the working group should be convened at the time when the MFF regulation is formally approved.

© Graham Bishop