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President Dijsselbloem
The Eurogroup highlighted that all Member States should focus more on the quality and composition of the adjustment, in order to ensure that our policies continue to be as growth-friendly as possible. In particular, the share of investment in public expenditure should increase in future years.
In this context, we have emphasised the importance of strong implementation of structural reforms. Not only to ensure long term sustainability of public finances, but above all to increase potential growth of our economies. As reported by the Commission last week, progress on reforms has been mixed. And we have invited the Commission to continue its close monitoring of this process.
Now on individual countries. First of all we welcomed that no draft budgetary plan was found in serious non-compliance with the obligations of the SGP. Before going into more detail on the individual Member States, I would like to recall that in the case of Germany, Luxembourg and Austria, the draft budgetary plans have been submitted by outgoing governments. Ant the incoming governments will submit updated plans once the draft budgets are available, and we will revisit these plans afterwards on the basis of the assessment by the Commission of course.
This being said, we have dedicated most of our time this afternoon in the meeting to those Member States that were found not fully compliant and asked ministers to present their budgetary strategy in reaction. We recognised that, for a number of Member States, compliance with the rules of the Stability and Growth Pact is assessed to be at risk. We therefore invited those Member States to take – as appropriate – additional consolidation measures within their national budgetary process, or in parallel. These Member States are in particular Spain, Italy, Malta and Finland. And the respective Ministers showed their full commitment to address this risk and explained how they plan to respect the budgetary rules.
In the case of Malta, a range of measures has been adopted in the context of the 2014 budget.
In the case of Italy, a number of measures are in the process of implementation, among which spending review, privatisation plan and number of tax measures.
In the case of Spain, we were informed that measures, based on the National Reform Programme, are currently in preparation, including a second round of labour market reform.
In the case of Finland, we were informed that new measures will be announced shortly.
The Commission will assess these measures once they have been adequately specified and will provide an updated assessment to the Eurogroup thereafter, and will bring these countries fully in line with our rules.
VP Rehn
Today's meeting marked another significant milestone in the deepening of economic governance in the euro area. Even three years ago, few would have given credence to the idea that finance ministers would come together to exchange views and have a serious and substantive, action-oriented discussions on their draft budgetary plans, on the basis of opinions issued by the Commission. And yet, here we are today...
This exercise has brought a new level of transparency to budgetary policy in the euro area, fostering an open debate on budgetary plans and facilitating scrutiny by national stakeholders and euro area peers.
The overall picture emerging from our analysis of the 13 budgetary plans shows that the large consolidation effort implemented in recent years is now bearing fruit as regards public finances. This can be seen in the fact that debt in the euro area will stabilise in 2014. Moreover, the pace of consolidation is set to slow down further, so that the average change in the structural balance next year will be of one quarter of a percentage point of GDP.
You may recall that last year, 2012, the average change in the structural balance was worth one half of a percentage point of GDP. This year it is going to be around three quarters of a percentage point of GDP and as said next year around one quarter of a percentage point of GDP at the same time as debt is stabilising.
Overall, the draft budgetary plans are broadly consistent with our forecast. We have seen much less tendency than in the past for over- optimistic projections, which was a major bad habit in Member States. This is an important improvement which contributes to the consistency and credibility of fiscal policy.
It is also essential that progress on structural reforms be stepped up. The Commission has assessed the plans for structural reforms with a budgetary impact – the Economic Partnership Programmes – submitted by France, the Netherlands, Malta, Slovenia and Spain. Substantial reforms are underway or planned to pension and health systems, and there is progress on improving national fiscal frameworks. Yet results are more mixed when it comes to tax reforms. Overall, there is a need to step up structural reform to boost sustainable growth and job creation. This is an essential, and no less important, complement to fiscal consolidation, as the European Commission has consistently stressed, and we will continue to stress this very important fact.
As regards specific cases, you will recall that the Commission assessed the plans according to a classification ranging from serious non-compliance to compliant. The fact that none of the draft budgetary plans assessed were considered non-compliant is important. It shows that all Member States concerned are taking seriously their commitments to sound public finances, which we saw today in the meeting where we had very substantive and serious discussions on many budgetary plans;
I would just say that three countries, France, the Netherlands and Slovenia, were considered compliant but with no margin, and as such were invited to ensure that their budgets are implemented rigorously to avoid risks of non-compliance. In the case of France, given its importance as the second economy of the euro area, I very much hope that next year will also see an acceleration of economic reforms to lift sustainable growth and job creation, because that is what the French people are expecting.
The three countries considered broadly compliant – Belgium, Austria and Slovakia – are each required to correct their excessive deficits this year. I am pleased that Belgium, for which the Excessive Deficit Procedure had to be stepped up six months ago, now looks to be on track for a sustainable correction, as does Austria. For Slovakia, on the other hand, a sustainable correction looks not yet assured.
Finally, five countries have been considered "at risk of non-compliance" – these are Finland, Italy and Luxembourg, which are in the preventive arm of the Stability and Growth Pact, and Spain and Malta, with ongoing Excessive Deficit Procedures. For Finland, both the Commission and the government expect the 60 per cent debt threshold to be breached next year. While we do not yet see the need for an Excessive Deficit Procedure to be launched, this trend is clearly worrying. The Commission will need to monitor this situation closely and will probably return to the matter when we present our Winter Forecast.
In the meantime, I draw your attention to the statement of today where the Eurogroup invites those Member States whose plans are at risk of non-compliance, to address the risk and against that background, the Eurogroup takes note of additional measures which will be announced shortly in the case of Finland.
Regarding Italy too, the principal concern relates to the debt benchmark, since compliance in 2014 is at risk, according to our analysis of the Draft Budgetary Plan. I am aware of the recent announcements by the Government regarding privatisations and I look forward to receiving further details of these, and especially, of how the spending review underway could deliver savings already in 2014. Provided these measures are substantiated and formalised in the coming weeks, we would be able to take them into account when preparing our Winter Forecast, which is going to be the next checkpoint of the fiscal policy of the euro area Member States.