ECONOMY

Almunia upbeat on SGP

PARIS – European Economic and Monetary Affairs Commissioner Joaquin Almunia said yesterday he was optimistic that agreement on reforming the EU’s Stability and Growth Pact could be reached by mid-March. «The next Ecofin meeting (of EU finance ministers), which is being held on January 18, will be decisive. But I’m optimistic about the likelihood of reaching an agreement before the European Council (of EU leaders) in mid-March,» Almunia told French newspaper Le Figaro in an interview. The Commission has offered proposals to give eurozone states more flexibility to run deficits during economic downturns, provided they have saved money during good years. The review was triggered by a controversial decision by EU finance ministers to suspend disciplinary action against France and Germany, the eurozone’s two powerhouses, after they repeatedly bust the 3 percent limit of gross domestic product. Almunia said the European Union had to find a better balance between the necessity to respect rules and the necessity to adjust budgetary policies in a rational, not mechanical way. «That’s why the negotiation under way must take into account the quality of public spending undertaken by states: the fact, for example, that these sacrifice a particular effort to spending on research and development,» Almunia said. «Excluding expenses is not conceivable because that would contravene the treaty’s rules. One thus has to ‘take them into account.’ We can find an agreement around this term,» he said. Almunia said the European Commission was «attentively» watching the level of the French public deficit and made clear France could face punishment if its deficit is again above the EU limit of 3 percent of gross domestic product in 2005. «If (the deficit) remains above 3 percent, we could very well take a new decision – and at any time,» he told Le Figaro, which released the interview ahead of publication today. Almunia said the European Commission’s December decision to halt budget disciplinary action against Germany and France had been taken on the basis of its economic forecasts made in October. «If our October forecasts are confirmed, France will manage to bring its deficit below the 3 percent. In any case, we will update our forecasts in March and we will watch the development of the French public deficit attentively,» Almunia said.