Eurozone leaders in tussle over budget rules

GMT 20:11 2014 Monday ,07 July

Arab Today, arab today Eurozone leaders in tussle over budget rules

Mario Draghi, president of the European Central Bank
Brussels - AFP

Leaders from struggling eurozone economies continued a push to loosen strict EU budget rules Monday despite firm opposition from Germany, which feels that flexibility must be matched by structural reform.
"We must find a balance between stability in the rules and a flexible and intelligent interpretation of these rules," Spanish Economy Minister Luis de Guindos said upon arrival for talks with eurozone counterparts.
With the worst of the debt crisis in the past, "some flexibility (…) would be welcomed," Irish Finance Minister Michael Noonan agreed.
His country was one of four eurozone members bailed out during the four-year crisis.
All 28 members of the European Union are bound by the Stability and Growth Pact which sets limits on the size of deficits and amount of public debt a country can run up every year.
Since the crisis, Brussels has tightened its policing of the rules, and member states now risk penalties if agreed targets are missed.
But Italy, led by the newly installed premier Matteo Renzi, wants more flexibility, saying that the European Commission, pressured by Germany, has put too much emphasis on austerity and not enough on protecting jobs and growth.
"Flexibility is not a request made by Italy, it is what Europe needs," Renzi said Friday in Rome as Italy took over the EU's six-month presidency.
But the Eurogroup of finance ministers, where Germany's view is decisive, insists that flexibilty is already a part of the existing pact.
Moreover, governments in the eurozone's richer countries worry that calls for flexibility are in fact thinly disguised ploys to abandon reform and avoid having to build sound public finances.
Member states "of course" agree that investment and growth should be encouraged, German Finance Minister Wolfgang Schaeuble said as he arrived for the meeting.
"But this shouldn't serve as an excuse to avoid things that are just as necessary," he added.
In an effort to close the debate, EU leaders late last month agreed to "the best use of the flexibility that is built into the existing" rules in a final strategy for the EU's direction over the next five years.
But a European source said on Monday that Renzi believed strongly that "the flexibility element of the pact has not been developed enough" and that more clarity was needed.
"The Italian presidency will create a very clear understanding of what can be done," the source said.
Eurogroup head and Dutch Finance Minister Jeroen Dijsselbloem for his part said: "It is up to the commission whether countries are allowed more flexibility."


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