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Malta lent its support to the latest proposals for the disputed parameters of the Stability and Growth Pact put forward by the Luxembourg EU Presidency at yesterday’s Council of Economic and Finance Ministers meeting.
Luxembourg Finance Minister Jean-Claude Juncker yesterday said he does not rule out the possibility that the stability and growth pact will remain as it is.
Speaking after the meeting about the proposal to overhaul Europe’s fiscal rulebook, Juncker said he remains “optimistic” that the an agreement on the reforms will be reached at their next meeting on 20 March.
“But at this stage I cannot really see how we can possibly get the non-euro zone member states on board,” he told a press conference.
Any reform to the pact has to be approved by both the 12-state euro group and then all 25 EU member states.
“I don’t rule out that we will stick with the pact as it is,” Juncker said.
“It is a pact which works badly, but I have no wish to replace a pact which is doing badly with a pact which gives the impression of working but which will go badly later,” he said.
In a statement released by the Finance Ministry yesterday evening, Finance Ministry Parliamentary Secretary Tonio Fenech was said to have “expressed Malta’s broad support to the latest proposals laid down by the Luxembourg Presidency, emphasising the need to ensure that any changes to the Pact are based on sound economic fundamentals, thus strengthening further the credibility of the Pact”.
The Stability and Growth Pact requires Member States to control their deficits and debt at three per cent and 60 per cent of GDP respectively. The Finance Ministry elaborates, “These rules are economically sound but may be too rigid in implementation such that they do not take into consideration economic cycles, especially at a time when an increased Government expenditure may be required to boost economic growth. To this end, the present Luxembourg Presidency has prepared a detailed report with proposals as to how the Stability and Growth Pact is to be reformed and interpreted in the future, if the proposals are accepted at ECOFIN and then at the European Council.”
The objective behind the proposals is to strengthen the economic underpinnings and effectiveness of the Pact, so as to safeguard the sustainability of public finances in the long term and to avoid imposing excessive burdens on future generations.
In fact, EU Member States will be asked to embark on pension reforms as well as other structural reforms in healthcare, and in increasing employment and participation opportunity. To this end, the Presidency repeatedly stressed on the need for fiscal prudence required by every National Government such that budgets are balanced over the medium term to provide the economic strength to the Member State and the financial stability required to support future generations properly. The Presidency is also keen to implement continuity measures and is seeking to ensure that medium term economic and financial plans are continued seamlessly when a change in Government takes place in any Member State.
While no formal conclusions have been reached due to the diverse positions held by a number of Member States, the Presidency will hold a further meeting this month to try and reach a common position on the future of the Pact.
Juncker, however, is dubious the reform proposals would be backed by all 25 Member States. He comments, “Many of the new member states want to avoid absolutely every change to the pact that could weaken the credibility and stability of the single currency.”
The proposed reforms retain the commission’s right to launch disciplinary action against high-deficit countries and grant it the power to issue official warnings to member states not getting their public finances in order quickly enough.
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