European Commission risks “infecting EU recovery with virus of punishment” in Communication ‘re-enforcing economic policy co-ordination’

12/05/2010

Olli Rehn, European Monetary Affairs Commissioner

“The European Commission, with its paper issued today on economic co-ordination, yet again runs the risk of infecting the EU recovery with the virus of punishment”, said PES President, Poul Nyrup Rasmussen. He continued; “the lessons we are teaching the conservatives should be clear by now – we were right on an EU mechanism, we were right on a European Monetary Guarantee, we were right that a Financial Transaction Tax should be on the agenda: when will the Conservatives learn that we are right that draconian cuts and austerity measures will strangle any chance of making this recovery sustainable?”. Mr. Rasmussen was speaking in response to the Communication announced by EU Commissioner for Economic and Monetary Affairs, Olli Rehn. “The lesson of the last 4 months is that we are all part of the same economic region, we should stand together or fall apart. Punishment and sanctions just brings division and mutual recrimination”, concluded Mr. Rasmussen.

The PES has released a detailed ‘scoreboard” (below) which analyses the communication. It highlights that attention should be paid to the Europe 2020 strategy not being infected with an over-emphasis on fiscal consolidation in the national Member State programmes that form the heart of the Europe 2020 Strategy.

Party of European Socialists Scoreboard on 12 May European Commission Communication on Re-enforcing economic policy coordination

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Issue	Commission communication	PES position
Fiscal consolidation	shift towards austerity	stronger and lasting economic recovery, as well as economic convergence
Reform for Economic Governance	economic coordination for fiscal consolidation, structural reforms for fiscal consolidation	also wants reform to refocus the system on growth and jobs. A coordinated external representation is also crucial for more consistency and credibility
Policy Coherence	synchronize the assessment of the fiscal and structural policies as well as the preparation of the National Reform Programmes with the Stability and Convergence Programmes	This runs the risk of “infecting” the Europe 2020 process by subordinating the structural reforms only to fiscal consolidation.
Surveillance	proposes to broaden the criteria to current accounts, net foreign asset positions, unit labour costs, real effective exchange rates, public debt, employment, private sector credit and asset prices	should call for a broader set of criteria notably the headline targets for EU2020 Strategy: including employment (and unemployment), education, poverty, greening taxes, investment in research and innovation
Overcoming macro-economic imbalances	puts more focus on deficit countries	should ensure a balanced approach on the efforts to be made by both deficit and surplus countries (particularly Germany)
“Incentives” (sanctions)	Threat of stopping Structural and Cohesion Funds to errant Member States	should also recall the reforms of the Stability and Growth Pact, including positive incentives. More time for fiscal consolidation should be given to the Member States able to make the right investments and reforms
New financial instruments	does not mention this crucial point which also requires economic coordination, particularly the shift to new sources of taxation (financial and carbon) and the issuance of Eurobonds	Detailed positions on these instruments