EN Official Journal of the European Union CE 84/705

(2004/C 84 E/0791)

WRITTEN QUESTION E-3150/02

by Ilda Figueiredo (GUE/NGL) to the Commission

(4 November 2002)

Subject: Application of the Stability Pact

Commissioner Solbes Mira recently confirmed what had been common knowledge for some time, namely that the aims of the stability programmes would not be achieved in 2002. This is the case in Germany France and Italy and it is quite clear that Germany's public deficit will be above the 3 % threshold in 2002 (as admitted by the German Minister of Finance). The truth is now out. The Commission proposal, while reasserting the basic principles, highlights the predominantly political nature of the Stability Pact's aims and its limitations, especially in times of economic recession or slowdown. The Pact has served as a pretext for a policy of privatisation in areas which undermine public services and fundamental rights, such as public health, education, public investment and the proper and fait implementation of the Structural Funds. It is absurd to try to apply a single budgetary policy, which fails to take into account development level disparities within the euro zone despite the fact that these require a differentiated response in each Member State.

It is, to say the least, comical that, at a time when a proceedings are being instituted against Portugal owing to its excessive deficit, and a direct recommendation is being made for anti-social and deflationary policies to be applied, Commissioner Pascal Lamy should state in an interview with the Italian newspaper ‘Il sole 24 Ore’ that the 3 % rule is, in his view, ‘medieval’ and that ‘the Pact is an unrefined instrument of economic governance’. The President of the European Commission, Romano Prodi, has, for his part, in an interview with ‘Le Monde’, acknowledged the Pact's deficiencies and the need to make it more flexible, describing it as a ‘stupid’ and ‘rigid’ instrument. Prime Minister Jean-Pierre Raffarin has stated that the only restriction is the 3 % figure and that he would therefore not attempt to achieve the objectives of the stability programmes but would instead endeavour to keep his electoral promises by lowering taxes and increasing state subsidies. Even Chancellor Schroeder, who had asked for the Pact to be established as a condition for accepting EMU, has suggested that there is no need for a dogmatic approach to the rules that have been laid down.

In this context, will the Commission answer the following questions:

— what is the purpose of maintaining the Stability Pact at present? Why does the Commission not decide instead to suspend the Pact immediately and to open a wide-ranging debate on the current broad lines of economic and monetary policy, with a view to promoting the growth of a labour market that shows due respect for workers and the fight against poverty and social exclusion?

— does it not consider that, in view of all the public statements made by leading members of the Commission, it should immediately suspend the procedings instituted against Portugal owing to its excessive deficit?

Answer given by Mr Solbes Mira on behalf of the Commission

(10 December 2002)

The main purpose of the Stability and Growth Pact (SGP) is to ensure sound budgetary policies thus avoiding excessive deficits. Achieving the SGP target of ‘close to balance or in surplus’ will ensure that budget positions remain on a sustainable path while the automatic stabilisers are allowed to play freely over the cycle helping to support growth in bad times without breaching 3 %. Sound public finances also provide the budgetary room necessary for structural reform in support of growth and employment. The SGP has worked successfully in that it has contributed to ensure a growth-friendly policy mix.

However, it must also be acknowledged that looking at individual Member States, some are now close to, or have even surpassed, the 3 % of gross domestic product (GDP) deficit reference value and have not yet achieved the ‘close to balance or in surplus’ goal of the SGP. The Council has addressed a recommendation to Portugal under the excessive deficit procedure (EDP) and the Commission has launched the EDP for Germany. The Commission has also recommended to the Council to issue an early warning to France. This indicates that the rule based fiscal policy framework (EDP + SGP) operates as intended.

Achieving and maintaining a close to balance budgetary position creates the necessary room for the automatic stabilisers to play fully, it also provides room to cope with the possible budgetary impact of reforms aiming at enhancing growth and employment.

Overall, it is the opinion of the Commission that the design of the budgetary rule based framework is appropriate but that efforts can be made to improve its implementation. The Commission will come forward with a Communication before the end of 2002 on this issue.