92002E2806

WRITTEN QUESTION P-2806/02

by Jules Maaten (ELDR) to the Commission

(30 September 2002)

Subject: Statements made on 24 September by the European Commission concerning a relaxation of the rules governing the reduction of budget deficits applying to the euro area countries

1. How can the statement made by the European Commission on 24 September 2002 about a relaxation of the rules governing the reduction of budget deficits be reconciled with another statement it made on the same day that there will be no tampering with the Stability Pact, and is the European Commission aware that, in taking that position, it was acting against the spirit of the Stability Pact and, consequently, inflicting serious damage on consumer confidence, which is already low?

2. Can the European Commission clarify how it will explain to Irish citizens why their country received a warning earlier this year, while Germany, a big Member State, did not and why now, for the second time within a period of a few months, some big Member States France and Italy will not have to comply with their obligations under the Stability Pact, and can the European Commission confirm that a twin-track policy is being pursued within the euro area, with the big Member States being able to ignore agreements but not the little Member States?

3. How can the European Commission's current position be reconciled with the press release dated 14 May 2002 issued by Commissioner Solbes, in which he urged the Member States to make a last effort to reach a close to balance by 2004. Stability should become the acquis for the euro area and Europe. The process of budgetary consolidations needs to resume as soon as possible. Otherwise we will be forever in a transition period and would be impossible to milk the full benefits of our economic policy. (sic)

Answer given by Mr Solbes Mira on behalf of the Commission

(17 October 2002)

The statement of 24 September 2002 is in no way to be interpreted as a relaxation of the rules of the Union fiscal framework. Rather, it emphasises the importance of strengthening the implementation of the Stability and Growth Pact (SGP) in order to ensure the achievement of the objective of a balanced budget position. It aims at doing so by explicitly incorporating in this framework the effects of cyclical developments on budgetary policy and by drawing the attention of Member States to the importance of a forceful and swift action when divergences in the adjustment path or excessive deficits are identified. This statement was also aimed at restoring confidence as it clarified key issues when confusing criticisms on the working of the SGP were undermining the credibility of the Union's fiscal framework. This framework does serve the Union's economies well as it helps to avert unsustainable fiscal positions and to maintain inflation expectation to historic lows.

The press release dated 14 May 2002 can be reconciled with this statement in that Member States still in deficit are urged to make considerable efforts to achieve balanced budgets. However, considering the actual economic conditions, the required adjustment now to achieve the target by 2004 would have been too high. Consistent with the May 2002 press release, these Member States are urged to resume consolidation without delay but are, in addition, urged to commit to consolidate by at least an agreed minimum path of structural adjustment, so that the transition period can finally be concluded by 2006 at the latest.

For its part, the Commission is confident that each actor will play its role in the system. Nevertheless, the Commission will require full compliance by all Member States with their commitments under the EC Treaty and the SGP thereby ensuring that no twin-track policy favouring any Member State is pursued. The Commission will therefore activate the procedures foreseen by the EC Treaty and the SGP whenever necessary. This is in line with past policy, as these procedures were triggered by the Commission already in 2001 when Ireland failed to respect the Broad Economic Policy Guidelines (BEPGs) and in 2002 when Germany and Portugal failed to meet the agreed budgetary target.