The penalization of productive investment caused by fiscal consolidation policies and the growing awareness of the vicious circle that originates from indiscriminate cuts in public spending, which tend to prolong debt crises over time, are the basis of the new initiative by the European Commission.
In a letter sent by the Vice-President of the Commission Olli Rehn to the Ministers of Economy and Finance and to the European Parliamentarians, the ways in which to insert an investment clause in the context of the assessments envisaged by art. 5(1) of Regulation 1466/97, concerning the "preventive arm" of the Stability and Growth Pact (which concerns those who are under a 3% deficit and therefore out of an infringement procedure), maintaining full respect for the architecture tax monitoring system of the Union.
The Commission therefore proposes to allow temporary deviations of the structural deficit path from the Medium-Term Objective, i.e. a balanced budget, under specific assumptions:
– the economic growth of the Member State remains negative or significantly below the potential level.
– the deviation must not lead to the overrun of the maximum ceiling of 3% envisaged for the deficit-to-GDP ratio, and the rules on public debt are equally fulfilled.
– the deviation granted concerns spending plans connected to projects co-financed by the European Union itself, through the "Structural and Cohesion Policies" or the "Trans-European Networks" (TEN) and connection plan (Cef, Connecting Europe Facility), provided they have a positive, direct and verifiable effect on the public budget in the long run.
The letter specifies that this possibility is intimately linked to the current situation of exceptional difficulty, and that when the conditions on which it is based are no longer current, with the prospect of a return to growth for the member country, action should be taken in such a way as ensure the achievement of the objectives of the MTO within the established times.
The above elements will be applied for the first time in the assessment of the 2014 public budget and in the 2013 state of public finances and will be reviewed annually.
