Artificial Dilemma Between Austerity and Growth Solved
The resolution of the “artificial dilemma” between fiscal discipline and growth is the biggest “value add” of the latest EU summit, Prime Minister Janez Janša said as he came out early from the last meeting in Brussels. He doesn’t believe many new measures are needed to kick-start growth but rather, the implementation of those that have already been adopted
The PM hopes that that the debate on the artificial dilemma between fiscal discipline and growth will now end. “Everyone agreed that both are needed and that it’s just two sides of the same coin”, Janša said. As to controversial topics such as the prospect of joint EU bonds, project bonds and a financial transactions tax, “we heard little new actually, the views differ alot”. He said that a point repeatedly made was that issuing bonds jointly would mean a change to the fundamental rules of the game in the EU which would require a lot of time. Since most of the member states disagree with the proposal, Janša doesn’t think it’s worthwhile starting the process.
Similarly, a majority of the member states oppose a European financial transactions tax. Janša however expects some form of the tax will be introduced eventually but not any time soon. He believes several EU members may try to introduce such a tax on their own before it is introduced at the EU level. Slovenia is also considering this option.”We’ll probably opt for this step next year unless agreement at the EU level is reached before that, which I personally don’t believe will happen,” the Prime Minister told reporters after an informal dinner of EU leaders. There was a bit more support for project bonds. “The debate today did not indicate any major consensus in principle, rather scepticism about project bonds, albeit to a somewhat lesser extent”. Slovenia deems project bonds a good instrument when designed to realise the initial idea, that is to help those countries that need stronger growth stimulus. However, it is almost certain they will not be introduced as a general European instrument as at least a third of the member states say they do not need the instrument.
The latest meeting served as preparation for the formal EU summit in June when EU leaders are expected to adopt a comprehensive package for growth and jobs. Asked whether the package will bring anything new, Janša said that “we don’t need much new really”. He went on to say “the word growth has not emerged in recent months, this is a key word around which the European paradigm is built”.
“There’s practically no proposals for measures to stimulate growth thatare not contained in some of the European documents already adopted. It’ll probably be a package of what can realistically be achieved from these documents at this time and a repetition of existing commitments, guidelines and programmes.”
Commenting on plans for a capital injection into the European Investment Bank, Janša said that considering the financing sources Slovenia could expect from the bank, it made sense to participate in the project, but that consensus had yet to be reached on the matter. He said that Slovenia could chip in one to two million euros into the potential recapitalisation of the bank. EU leaders also discussed national reform and budget plans that the European Commission will evaluate at the end of the month. The PM said that since it had adopted the fiscal stabilisation package, Slovenia has been receiving messages that it was on the right track. However, he also pointed out that Slovenia would now have to take the next step and carry out structural adjustments and secure long-term sustainability of public finances which, he said, is the only condition for sustainable development.
Commenting on the contribution by the new French President, Francois Hollande, to the debate, Janša maintained that his participation “did not substantially change the mood”. Hollande’s appearance confirmed the non-existence of the artificial dilemma between fiscal discipline and growth. “Balancing public finances is a very important goal for France and we also heard from them that this is the prerequisite to sustainable growth and development”.
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