Reining in spend-thrift governments and making sure macroeconomic imbalances do not undermine economic growth are the two main goals of the economic governance package on which the Parliament and the Council tentatively agreed 20 September 2011. We talked to parliament's lead negotiator Dutch Christian Democrat Corien Wortmann-Kool ahead of a vote in plenary on 28 September 2011. who said the package does not focus only on reducing debt but also provides incentives for growth-friendly reforms and policies.
What has the Parliament achieved in negotiations?
The EP achieved a much stronger surveillance procedure in the stability and growth pack in order to ensure sustainable public finance in the member states and prevent us from having another Greek debt crisis. One of the last stumbling blocks was the EP's request to introduce reverse qualified majority voting (eurozone governments would have to come up with a qualified majority to reject the Commission recommendation or it would be automatically adopted) to trigger sanctions for governments that haven't taken the necessary steps to cut public debt. The EP got agreement on that for all decisions in the framework of the Stability and Growth pact.
The economic governance package is an important pillar to boost EU competitiveness, because its aim is not only to limit the unsustainable debt burden but also to provide strong incentives for the reforms and policies needed (to boost growth).
Why push austerity, if public debt wasn't the cause, but the consequence of the crisis?
Those member states with the most prudent fiscal policies and growth strategies are now performing best. This is proof that fiscal stability leads to growth and employment.
We should put in place the necessary safeguards on our financial markets by further strengthening the European financial supervisors, ensuring more transparency on our financial markets and by establishing a European crisis mechanism for the banking sector. In addition, a number of further measures such as a financial transaction tax and Eurobonds are being studied.
Economists warn that macroeconomic imbalances arise from excessive surpluses as well as excessive deficits, but it seems that deficit countries like Greece and Spain are getting all the flak, while surplus countries are let off the hook
The EP managed to secure a balanced approach with regard to "intelligent symmetry" pointing at both deficit and surplus countries. Nevertheless, we should keep in mind that the need for policy action is particularly pressing in member states showing persistently large current-account deficits and competitiveness losses.
Disagreements remain between the political groups with left-of-centre groups fearing that the package is too closely focused on austerity, to the detriment of growth and employment.
Story originally published on 26 September 2011