Countries with budget deficits of 3% or less, who are reducing their debt could stand to benefit from the ‘structural reform clause’. A temporary deviation from the medium-term budgetary objective will be allowed thanks to a hitherto unused article in the rules. It will mean that national contributions to Juncker´s Plan will not be considered for deficit calculations.
Inside the Commission, there has been insistence that the Fiscal and Growth Pact remains unchanged.
“The spirit of the Pact remains, we haven’t changed the rules. The 3% deficit limit or the 60% debt limit are still there”, an EU official explained on condition of anonymity, “but we take into account the improved economic situation of the Member States. Now, it’s up to them to show how they will implement their reforms. There’s no chèque en blanc”, he added.
These new open-minded fiscal rules could be viewed as the only viable option going forward. Given that Juncker’s Plan begins the year with just €5 billion from the EIB, the increased flexibility is being viewed as the most prudent course of action. The €8 billion guarantee in the EU budget-which will be used to raise the size of the fund-is not yet in place.
“It’s really important that somebody comes out and says ‘we really need to talk about investment’, because it’s the only game in town”, Erik Nielsen, Global Chief Economist at Unicredit Bank, said about the Commission’s latest efforts to encourage growth.
The lack of fresh funds after the EU Summit was thought to have resulted from German insistence that the programme of austerity be adhered to. The initial public projects will not be in place “until the end of the summer”, said Commission Vice-president, Jyrki Katainen, when presenting the new rules.
A day earlier, in Brussels, Nielsen appeared sceptical about the capacity for the private engine to drive growth.
“Why is there so little private investment?” he wondered. “There’s both a demand and a supply issue. Private investment never leads GDP out of a recession in Europe, never”, the economist from Unicredit concluded in what was an undoubtedly gloomy outlook.