Pierre
Moscovici, trying to make Italian duvet fit EU suitcase
The
economics commissioner on the challenge of keeping budget rules
squishy enough .
By PIERRE
BRIANÇON 10/27/16, 7:00 PM CET Updated 10/28/16, 5:52 AM CET
PARIS — Pierre
Moscovici has an expression to show the direction he’d like his
high-stakes negotiations with Italy to take: “We have to fit the
duvet into the suitcase.”
The duvet is the
Italian budget. The suitcase is the EU’s Stability and Growth Pact,
which sets out the fiscal rules eurozone countries are supposed to
live by.
The European
commissioner in charge of enforcing fiscal discipline in Europe was
speaking to POLITICO on the tension between the need for rules to be
enforced and for flexibility to adapt to political situations. The
trick, he insisted, is that “the yellow line” never be crossed.
Italy offers best
and most recent case in point.
In a letter sent
Tuesday to Italian Finance Minister Pier Carlo Padoan, Moscovici and
European Commission Vice President Valdis Dombrovskis asked the
Italian government why it was breaking previous fiscal agreements by
planning for a fiscal deficit of 2.3 percent of gross domestic
product in 2017 instead of the 1.8 percent agreed earlier this year.
Regarding the
Italian case, Moscovici also insists that as much as Europe needs
rules, they need to be enforced with tact.
That looked a bit
harsh considering that Italy’s budget remains under the 3 percent
of GDP limit set by the Stability and Growth pact and that Italian
Prime Minister Matteo Renzi faces the difficult task of seeing a
major constitutional reform approved at a referendum in December.
Italy explained the changes by saying the extra spending was needed
to deal with the unforeseen flow of migrants and its August
earthquake.
Long past Trotskyism
But Moscovici wanted
to address the frequent reproaches addressed to the Commission by
critics — either that it is too rigid in enforcing its rules, or
that it is on the contrary too lenient with countries that carry
political weight in Europe, such as France.
The commissioner, a
former French finance minister, took umbrage at a tweet I had sent a
few weeks ago to the effect that his advocacy of fiscal discipline
seemed at odds with his record in government. In 2013, the last full
year when he was finance minister, the French budget amounted to 4
percent of GDP — way above the EU limit, even though it was on the
way down. After he messaged back implying (unsurprisingly) that I was
wrong, we decided to talk it out.
Moscovici denied
there is any gap between what he did then and what he advocates now.
“Save for my
Trotskyite years, which are quite distant now,” he joked, “I have
always thought that debt was the enemy of the economy. One euro spent
on debt service is one euro lost for public services.”
He also pointedly
reminded me that he has always belonged to the reformist,
business-friendly wing of the French Socialist party.
But coming back to
the Italian case, Moscovici also insists that as much as Europe needs
rules, they need to be enforced with tact. “Seriousness, yes. But
seriousness with intelligence,” he says.
The Stability Pact,
Moscovici says, now makes room for flexibility for countries that
need it to invest, implement structural reforms, spend more on
refugees or the fight against terrorism, or natural catastrophes such
as earthquakes. “But it always has to be within the rules,” he
says.
To the skeptics who
note that exceptions have been many, the commissioner retorts that
all decisions by the Commission have been taken, after much debate,
unanimously. “We have social democrats or conservatives, we have
all agreed,” he says. “Nothing we have decided was outside the
rules.” There were, he says, “long debates” on the cases of
France, Spain, Portugal and Italy – which all were spared the
sanctions that the Commission could have possibly decided.
“In every single
one of those cases, we had reasons not to sanction,” he insists.
Stability through
flexibility
“My philosophy is
that we should avoid sanctions whenever we can obtain the same and
even better results through dialogue, incentives, convincing,” he
adds. “The time is past when the Stability Pact was too rigid and
pro-cyclical. We need a democratic and political system. But it is
only possible with intelligence if it is legitimate. And it can only
be legitimate if it is credible.
“That is the
nature of the dialogue I have with Renzi and Padoan, which I imagine
will continue, as usual, until the last minute.”
As for France,
Moscovici sent a stern warning in September that the Commission’s
patience had run out.
Moscovici insists on
the need for political decisions on the best ways to implement the
rules and is “strongly opposed” to the proposal recently floated
by German Finance Minister Wolfgang Schäuble to let the European
Stability Mechanism (eurozone bailout fund) enforce the rules. “Those
are highly political decisions that cannot be left to a bureaucratic
body,” he says.
As for France,
Moscovici sent a stern warning in September that the Commission’s
patience had run out and that the country needed to really take its
budget deficit down next year – below the 3 percent limit for the
first time in more than a decade.
“I wanted to tell
the current government that it has pledged to do so and is expected
to keep its promise, even if it’s an electoral year. And also in
the longer term remind whoever takes over government next May that
now is not the time to renege on years of discipline,” he said.
That’s an allusion to the many programs of unfunded tax cuts that
the conservative candidates to the presidency have put forward so
far.
Authors:
Pierre Briançon
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