BUSINESS

EU worried Commission not applying budget rules equally

TAGS: Economy, EU

European Union finance ministers are worried that the European Commission is not applying budget laws in the same way to large and small countries, which undermines confidence in the rules, the chairman of eurozone finance ministers said.

Speaking at a hearing in the European Parliament, Dutch Finance Minister Jeroen Dijsselbloem said the examples of Spain, Portugal and France raised questions about the predictability and objectivity of application of the rules.

“If member states feel that the Commission’s decisions are very hard to understand and very hard to predict and are not objective, (that they) are perhaps distinguishing between small member states and large member states, that is a very big worry,” Mr Dijsselbloem told parliamentarians.

“I can sense it during the Eurogroup meetings that ministers are becoming a little concerned about this,” he added.

“If people feel that there is a difference in treatment in different situations, between different member states it becomes more and more difficult to ask all of us to comply with what we have agreed,” he said.

The European Commission last month put off any disciplinary action against Spain and Portugal for busting their budgets until after the Spanish general election on June 26, a move seen as a bonus for conservative Spanish prime minister Mariano Rajoy.

European Union economics commissioner Pierre Moscovici said the Commission did not consider this was the right moment to get tough and said he would give each country an extra year to bring their deficits in line with EU rules.

“There have been some concerns regarding recent decisions on ... Spain and Portugal, because that seemed to indicate also extra time in the excessive deficit procedure,” Dijsselbloem said. “This raised a lot of questions if the rules where being applied correctly, so we will discuss that.”

It was the second time in a year that the EU executive had bowed to political reality rather than strictly enforce the bloc’s rules on excessive budget deficits, fuelling doubts over its willingness ever to apply fiscal sanctions.

Last year, it gave serial deficit offender France two more years to finally cut its budget gap to within EU limits. European Commission president Jean-Claude Juncker also raised eyebrows with remarks last month on the treatment of France.

“There was a comment by the president of the Commission on how France should be treated differently and why... that France apparently deserved a different treatment because it is France,” Mr Dijsselbloem said.

“I am trying to understand these kind of comments and a lot of other member states were also trying to understand these kind of comments,” he added.

Brussels also granted Italy the maximum flexibility under EU fiscal discipline procedures in response to demands from heavily indebted Rome to be given more space to revive anemic growth and cope with the cost of an influx of refugees.

Disregard for EU budget rules, which set a ceiling for budget deficits at 3 percent of GDP and for debt at 60 per cent of GDP, was one of the factors behind the sovereign debt crisis that threatened the unity of the eurozone.

[Reuters]

Online