In today’s College we had a detailed debate on the country-specific situation regarding compliance with Stability and Growth Pact and macroeconomic imbalances and reassessed the economic and fiscal situation in particular in the case of France, Italy and Belgium.
Decisions related to implementation of the Stability and Growth Pact and macroeconomic imbalances lie within the empowerment of myself and Commissioner Moscovici.
Nevertheless, given the importance of the subject we felt it’s important to also discuss it in the College.
The package we discussed today constitutes the next step in the European Semester process following the adoption of the Annual Growth Survey in November.
We have in particular decided on the steps to be taken under the Macroeconomic Imbalance Procedure (MIP) and the Stability and Growth Pact (SGP) for some Member States. This relates to the countries that were deemed at risk of non-compliance with the Stability and Growth Pact last autumn. In particular, France, Italy and Belgium, for which decisions were postponed last November. It also relates to the 16 countries for which we decided in November that there was a need for an In-depth analysis under the Macroeconomic Imbalances Procedure.
Before we go into the individual country decisions, let me recall that the economic surveillance package builds on the three priorities: how to strengthen economic growth and job creation in Europe, namely: boosting investment, accelerating structural reforms and pursuing fiscally responsible policy. It is also in line with the guidance on the Commission’s Communication of 13 January 2015 on “making the best use of the flexibility within the existing rules of the Stability and Growth Pact”.
Obviously, our decisions take into account the global and national economic situations, as well as intense interactions with the Belgian, French and Italian authorities over the last few months and weeks.
Now I’d like to give you a broad overview or main elements of the decisions taken today on these three countries.
On Italy and Belgium, on the fiscal policy side, we had to assess whether the breach of the debt criterion warrants the opening of the Excessive Deficit Procedure. Taking into account all the relevant factors including, amongst others, weak growth and implementation of structural reforms, it was concluded that opening of Excessive Deficit Procedures at this stage are not warranted – neither for Italy, nor for Belgium.
Regarding the position of both countries under the Macro-Imbalance Procedure, Italy is identified with excessive imbalances requiring decisive policy action and specific monitoring, while Belgium is identified with imbalances.
As regards the situation in France, it was obviously the most complicated case to be discussed today.
It’s clear that France needs to step up its efforts both on fiscal and structural reforms side.
So, today, we have decided to issue – or to propose – to the Council a new Recommendation for France as how to address its excessive deficit and to set a new deadline for France to bring its budget deficit below 3% of GDP, this being by 2017.
In the coming days, we will issue a Recommendation for the Council to prepare this Recommendation where we also set out the path for 2016-2017, whereas for 2015 the Recommendation is to have a structural effort of 0.5% of GDP. The current assessment of the structural effort in France is 0.3% of GDP, which means that France needs to deliver an additional 0.2% of GDP in structural effort.
We will come back to assessing this situation three months after the Council would approve the Commission’s Recommendation, making it a Council Recommendation to France.
So, three months after this, we will come to reassess the situation, whether France is in compliance with this new Recommendation. In case of compliance, of course, no further procedural steps are needed. In case of non-compliance, there is a possibility of stepping up excessive deficit procedure.
As regards the position of France under the Macro-Economic Imbalance Procedure, France was identified with excessive imbalances requiring decisive policy action and specific monitoring.
Once again, we will reassess the situation in May, based on what specific structural reform proposals France is making in its national reform programme. And, once again, with the possibility to step up the Macro-economic Imbalance Procedure in this case, or to open the Excessive Imbalances Procedure, should the structural reform effort be deemed not sufficient.
In any case, it’s clear that more effort is needed. We believe we are providing with this decision guidance on how to move towards this further effort and we are certainly ready to constructively engage with the French authorities on how to deliver on this.
Pierre will elaborate on these cases in more detail, also on other cases as regards the Macro-economic Imbalance Procedure.