BRUSSELS (MNI) – EU Economics and Monetary Affairs Commissioner
Olli Rehn on Thursday said he was “sensitive” to the impact of austerity
measures on growth but defended tough fiscal rules nonetheless.
“This issue certainly merits analysis but we should be cautious
about drawing conclusions too quickly,” the EU Commissioner said.
“We should ask whether worse than expected recessions in some
countries can be attributed only to fiscal consolidation,” he said. “In
some countries it has been due to the fall in consumer and investor
confidence, and in other countries due to the complete loss of market
confidence.”
The EU’s rules “can adapt a country’s path of fiscal adjustment if
the economic situation calls for it,” Rehn said, pointing to the easing
of Spanish targets as proof.
When examining a country’s compliance with the EU’s fiscal rules,
the Commission emphasizes progress on reforms, Rehn said.
“While nominal targets may continue to dominate headlines, the
European Commission concentrates its assessment on the implementation of
agreed structural reforms,” he said.
Elaborating on the Commission’s approach, Rehn said it was “looking
at the agreed structural and fiscal effort, which is a certain amount in
euro terms, a year.” This methodology is unaffected by
lower-than-expected economic growth, because “it is not dependent on
economic growth but a fixed, medium-term objective, and the required
effort to meet that fixed objective.”
Rehn said the Commission would in November present its own report
on the future of the Eurozone, which he called “EMU 2.0.” The EU
Commissioner said he would brief EU leaders on the Commission’s thoughts
so far at their summit tonight, when they will be discussing another
report on the currency bloc’s future, drafted by the presidents of the
European Council, European Central Bank, Eurozone finance ministers’
group, and the European Commission.
The latter report, commissioned by EU leaders, proposes ideas
including a common ‘fiscal capacity’ for the Eurozone and economic
reform contracts between the European Commission and EU member states.
Rehn, however, made clear that he did not think there could be any
further debt mutualisation without deeper integration.
“It’s a bit like the saying ‘no taxation without representation,'”
he said. “There can be no further mutualisation of economic risk before
we have deeper integration of decision-making and better preventive
mechanisms to avoid free-riding and moral hazard.”
–Brussels bureau, +324-952-28374; pkoh@mni-news.com
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