Thursday, November 21, 2013

Historical day with no one noticing

Eurozone finance ministers have started to see each other almost as often as during the peak of the crisis. After last week’s meeting on bank resolution, they come together this afternoon in Brussels to discuss the European Commission’s latest fiscal assessments. In fact, today’s meeting is a historical meeting. Unfortunately, hardly anyone realises it. For the first time, the Commission has issued opinions on countries’ draft fiscal plans. Contrary to past policies, these opinions were made in parallel with governments sending the draft plans to their respective parliaments. This new set-up is part of the new fiscal surveillance framework, strengthening the role of the Commission. It gives the Commission the opportunity to influence and intervene in fiscal plans while they are still in the making. That’s at least the theory. In practice, the European Commission put on its velvet gloves for the first exercise under the new rules. In fact, the Commission has developed a sophisticated system of verbal categories for their assessments. No single government will be sent to the drawing table to revise its budget. In European slang, this reads as “no Draft Budgetary Plan has been found to be in serious non-compliance with the obligations of the SGP and that it is not necessary to request revised budgetary plans”. The Commission’s categories range from “compliant with the rules of the Stability and Growth Pact”, “broadly compliant”, “compliant with no margins” and “risk of non-compliance”. Using our EU dictionary, this translates into: Germany and Estonia are the only two countries without any fiscal problems, while all other countries need to stick to their plans as closely as possible; additional measures cannot be excluded.  For European insiders, today’s Eurogroup meeting is historical as it marks the next step of the first implementation of the Eurozone’s new fiscal surveillance framework. For this first exercise, however, the European Commission has put on its velvet gloves and left the fiscal axe at home. The Commission remains very cautious in using its newly won powers. Cautious or not, one thing is clear: fiscal policies in the Eurozone continue to point in one direction; and the direction is not towards loosening.

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