ECONOMY

Moscovici in charge of budgets seen prompting EU deficits debate

Pierre Moscovici, the man lined up to enforce budget discipline in the euro area, is the former finance minister of an economy that’s repeatedly failed to meet its deficit goals.

Appearing before the European Parliament in Brussels today to seek approval to become the EU’s next economy chief, it’s the Frenchman’s willingness to follow, enforce or alter German- inspired euro-area budget rules that’s coming under the greatest scrutiny.

“The budgetary rules must be respected by all member states, large or small, the same rules,” Moscovici said as he began testimony to parliament. “You can count on me to be a fair and impartial arbiter.”

The 18-nation euro area is still struggling to heal its debt-crisis scars, five years after Greece revealed that its deficit was more than twice its forecast, forcing it into two bailouts. Across the bloc, growth has ground to a halt, inflation is at its lowest for five years and unemployment is only slowly falling from the record 12 percent it hit last year.

“The French say they are dissatisfied because they believe we have a dumb way of regulating budgets — the Germans don’t want to change anything,” Philippe Lamberts, a Belgian member of the Parliament’s Greens group and the Economic and Monetary Affairs Committee, which is conducting the hearing, said in an interview before the session. “We need to hear his proposals.”

Budget Watchdog

While Moscovici’s task, should he win the Parliament’s approval, will be to police the budget rules that euro-area nations tightened during the financial crisis, he has signaled a desire to adapt them to each country, something that France and Italy have called for and a German-led group of countries has resisted.

“One would need to look at each specific situation, and each country should be judged on its own merit, as the nature, magnitude and root causes of the economic, financial and social challenges vary widely across member states,” Moscovici said in written replies to questions from lawmakers, published on the Parliament website in advance of the hearing.

When Moscovici was France’s finance minister in 2013, Olli Rehn — the Finn who held the portfolio throughout the debt crisis — allowed France an extra two years, until 2015, to reach the bloc’s deficit limit of 3 percent of gross domestic product.

French Deficit

Yesterday, with the deficit now forecast to be 4.3 percent in 2015, Michel Sapin, Moscovici’s finance ministry successor, said it was time for the EU to consider changing its demands on government spending plans.

“All the efforts asked of France have been done,” Sapin told reporters in Paris. “The question is not France and Europe, it’s Europe. What can we do to have strong growth in Europe? The European Central Bank has acted, now what can we do on the budget side?”

Parliament can veto the full 28-member commission proposed by Jean-Claude Juncker, a former prime minister of Luxembourg who is slated to lead the new European Commission, the EU’s executive arm, starting next month. It cannot veto individual nominees.

Lawmakers may question Moscovici on the degree to which his decisions could be vetoed by former Latvian Prime Minister Valdis Dombrovskis, whom Juncker has nominated to the new position of vice-president with responsibility for economic issues. Dombrovskis has backed the German line on austerity. [Bloomberg]