quinta-feira, 27 de outubro de 2016

Pierre Moscovici, trying to make Italian duvet fit EU suitcase


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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