19/12/2013
The European Commission (EC), in an effort to avoid further economic crisis, has restrained the financial sovereignty of EU members.
On November 15, the web edition of the British newspaper, The Telegraph, posted an article with the headline “EU uses new budget powers to demand more austerity in Italy and Spain”.
Bruno Waterfield, The Telegraph’s correspondent in Brussels, writes that the European Commission has for the first time “exercised historic new EU powers allowing it to revise national budgets”. Moreover, national draft budgets are reviewed by Brussels before national budget committees have even voted on them. Thus, the non-elected European bureaucracy in Brussels took over national governments and parliaments of EU countries. The reason is that stability of the European currency is too delicate a matter to be entrusted to national governments and parliaments, for they are much more interested in their electorate and country rather than the well-being of Europe as a whole.
Olli Rehn, vice president of the European Commission, responsible for the euro-zone of 17 EU member states, pompously stated (I quote from The Telegraph article): “Because in an economic and monetary union, national budgetary decisions can have an impact well beyond national borders, member states have given the commission the responsibility”. This means credence cannot be given to the national government authorities of the EU countries. And further: “This is a historic moment! One has to ask whether the euro-zone’s voters yet appreciate what a huge shift in sovereignty this is away from national parliaments to conclaves of finance ministers and commission officials”. Stopping short of an outright demand for the revision of budgets, or imposition of penalties, Mr Rehn said he was encouraging governments to bring their 2014 budgets into compliance with the commission’s interpretations of the new rules. “This exercise is much more about partnership than penalties,” he said.
And who has been criticized by Brussels the most?
Spain and Italy have been warned that their budgets for 2014 are in breach of European Union rules. France was also cautioned to cut down on its budget expenses in 2014-2015. As Europe’s largest and most prosperous economy, Germany was lightly criticized for not making significant progress in following EU recommendations to help its neighbors in the euro-zone by encouraging domestic demand and imports, and also for decreasing their macroeconomic indicators.
However, as soon as a new government of Germany is established, considering the results of the 2013 autumn elections, it will have to introduce a new budget to the parliament with due regard to the Commission’s recommendations. As a side note, the most stable budget in 2014 (except for Germany) was in Estonia, an EU newcomer.
Italy and Spain – countries with the most floundering economies in the EU – have suffered the most. They were reprimanded for “breaking debt reduction targets in breach of spending caps” that were set out in the Maastricht Treaty that led to the very creation of the EU’s eponymous currency.
According to Waterfield, the commission’s Italy verdict has become “political dynamite”. The country’s Prime-minister, Enrico Letta, and the coalition are continuously torn by the arguments over tax reductions in the parliament. Left wing opposition in that same parliament vigorously struggle against the policies of austerity advanced by the Italian government.
Fabrizio Saccomanni, the Italian finance minister, believes that the suggested regulations on the Italian government at the behest of EU officials, can fatally weaken the country’s economy. This Brussels intervention aggravates the situation, especially after Mr Rehn ruled out an exempting €3bn in investment spending that the Italian government has included in its 2014 budget. It was planned to use the investment spending for privatizing of dilapidated cultural and architectural sites on condition that the new owners preserve their historical significance and allow tourists there. Nonetheless, the sum of money received in the course of privatization is hard to predict in advance – that is the very reason why the EC denied this source of budget input.
Mr Saccomanni, on the contrary, believes that the Italian government can spend any amounts of budget money in order to meet EU rules. Otherwise, the country will be threatened by even a greater economic decline that will inflame Italians against the policy of austerity, which is opposed by many forces: right- and left-wing parties alike.
Spain was told by the EC that its draft budgetary 2014 plan had a big fiscal gap nearly impossible to eliminate but which should have already been narrowed down.
The EC had given the green light to France’s budget for 2014 but with certain stipulations! The European Commission warned that a 2014 budget shortfall needs to be reduced by lowering budget expenses in order to balance it by 2015. Yet no word was spoken of how it should be done: let the French government figure that out.
Waterfield finally reported that “The commission has also cautioned Finland, Malta and Luxembourg, asking the three countries to review their 2014 budgets to ensure that they meet euro-zone targets.” So – welcome to the brand new EU, where the decision to cut national budgets is made in Brussels only! Unfortunately, it is impossible to ignore EC recommendations. Today, only 4 EU countries – Greece, Ireland, Portugal and Cyprus – get aid from the European Financial Stability Facility and remain under the strictest control of Brussels. Be certain, the EC will take any measures to keep the list of aid recipients short.
