EU leaders avoided any legal move to reopen stringent budget rules as they called for the flexible application of the existing rulebook and “bold steps” to foster economic growth.
In a summit communiqué which followed an Italian-led push to give member states more fiscal leeway, the leaders declared their “respect” for the stability and growth pact which governs Europe’s oversight of economic policy in member states.
“Very clearly, our common strength hinges upon each and every country’s success. That is why the union needs bold steps to foster growth, increase investments, create more and better jobs, and encourage reforms for competitiveness,” the leaders said.
“This also requires making best use of the flexibility that is built into the existing stability and growth pact rules.”
Shift from austerity
While Italian premier Matteo Renzi has marshalled socialist allies like French president François Hollande in favour of a move away from “austerity-only” policies, German chancellor Angela Merkel opposed any dilution of the pact.
With the fiscal rulebook strengthened at the height of the sovereign debt debacle, there is concern in many quarters to avoid undermining confidence.
With the emphasis now on inbuilt features of the pact, the key question is whether its application can be modified to enable member states to boost capital investment without breaching the rules.
The Government supports such moves, although Taoiseach Enda Kenny insists there is no scope to walk away from the budget deficit target in the October budget.
Irish officials see the potential benefit in the medium term only, and there is no direct reference to any distinction between current and capital expenditure in the communique.
The baton passes now to incoming commission president Jean-Claude Juncker, who still needs socialist votes in the European Parliament to have his nomination ratified next month.
Political sources said it falls to Mr Juncker to come up with a coherent plan to deliver on demands for flexibility within the pact as it stands.
According to the sources, the formal reference to flexibility merely heralds the start of a new political debate on the application of the pact.
In a nod to the battles to come, the leaders said in their communiqué that an upcoming review of their economic policy programme for the 2015-2020 period “will be a good occasion” to bring the pact fully in line with their strategic focus on job creation, economic growth and competitiveness.
Saying member states are emerging from the deepest economic crisis in a generation, the push for recovery was the first of five major priorities identified by the leaders for the next commission.
Outmoded promises
“We see efforts and reforms producing results. Yet it is not going to be a return to the promises of yesteryear. Important challenges remain: slow growth, high unemployment, insufficient public and private investment, macroeconomic imbalances, public debt, and a lack of competitiveness,” they said.
The other priorities were to empower and protect all citizens, to develop a “forward-looking” climate policy, ensure freedom, security and justice. The leaders also called for the EU to work as a “strong global actor”, saying it should be ensuring consistency between member states’ and EU foreign policy goals.
