Support grows for revised economic pact
Increased flexibility in Barroso-Van Rompuy draft.
• Portugal resists bail-out calls
• MEPs bid to increase influence
• Ireland seeks a new deal
• EPP leaders meet in Helsinki
Officials from eurozone countries have reacted positively to plans for strengthened co-operation on economic and fiscal policy drafted by the presidents of the European Council and the European Commission.
The cautious welcome from officials at a meeting this week improves the chances that the broad outlines of the pact can be agreed by the leaders of the 17 eurozone countries when they meet for an informal summit on the evening of 11 March.
Franco-German proposal
The pact was put forward by Angela Merkel, Germany’s chancellor, and Nicolas Sarkozy, France’s president, as a way to improve the competitiveness of the eurozone and reassure the bond markets about the eurozone’s sovereign debt. They set out their ideas at an EU summit on 4 February, but the idea ran into strong opposition from a large majority of the other eurozone countries, which resented what they saw as a diktat from Paris and Berlin.
In the aftermath of that meeting, Herman Van Rompuy, the president of the European Council, requested the meeting of eurozone leaders, which will now be preceded by a meeting of the leaders of all 27 EU countries to discuss Libya and the situation in north Africa.
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Van Rompuy and José Manuel Barroso, the president of the European Commission, have put together a draft version of the pact, which calls on eurozone members to take measures to improve their competitiveness, but stresses that countries should be free to choose what mix of policies to pursue.
Officials had their first discussion of the Van Rompuy-Barroso version of the pact on Monday (28 February). One official said that “people were broadly happy” with the draft and that there was “little fundamental opposition”, though there was disagreement about a call for more tax co-ordination.
Increased flexibility
Whereas the initial ideas from Germany and France called for countries to end automatic wage indexation and introduce a limit on debt levels into their constitutions, the Van Rompuy-Barroso draft offers more flexibility. It says that countries should take measures to ensure that wage costs remain in line with productivity and that they should “improve” indexation mechanisms.
Instead of requiring countries to write debt limits into their national constitutions, the new version says that countries can choose which legal instrument they use to commit themselves to limiting their debt levels.
A call for more tax co-ordination proved more contentious. Ireland, Slovakia, Malta, Estonia and Cyprus expressed reservations about attempts to co-ordinate taxes. The Commission is to make a proposal for a common consolidated corporate tax base on 16 March.
Several countries expressed concern that the pact might stray outside the EU’s existing legal framework. The new version stresses that all the measures should be in line with the EU’s economic governance rules, including the Europe 2020 strategy for growth and jobs, the economic policy guidelines, the stability and growth pact and macro-economic surveillance procedures.
One official said that more work needed to be done on the detail of the pact, as the document discussed on Monday was only four pages long. The official added that there could be agreement on the pact only if there was also consensus on other measures related to the stability of the eurozone. These might include changes to the European Financial Stability Facility, the European Stabilisation Mechanism and the bail-out packages for Greece and Ireland (see below).