Free Trial

MNI SOURCES: Eurozone Growth Pact Overhaul Faces Resistance

By David Thomas
     BRUSSELS(MNI) - Big eurozone states may block upcoming proposed changes to
the bloc's Stability and Growth Pact, preferring to keep rules limiting budget
deficits which they have been able to break when necessary anyway, sources close
to discussions told MNI.
     The European Commission looks set to publish its long-awaited review of the
Pact in late January or early February, and its recommendations look likely to
call for any lingering emphasis on the rule limiting budget deficits to 3% of
GDP, which has never proved a binding constraint, to be removed.
     The Commission may also propose rules to protect and promote
growth-enhancing public investment and spending although officials suggest that
there may be difficulties in identifying which investments qualify.
     "One can imagine that there will also be governments who do not see this as
the business of the Commission or at least don't want them to get involved," one
     Some contacts also speculated that there could be differences between
Commission Vice President Valdis Dombrovskis and Economy Commissioner Paolo
Gentiloni, with the latter thought likely to take a more expansive view as to
what qualifies as growth enhancing or sustainable.
     While the Commission looks set to recommend that the focus of fiscal
surveillance be put on sustainability of public debt, some big countries may
push back.
     Sources say they may be reluctant to abandon the discretionary and flexible
approach to violations of the old-style Pact which its complexity has allowed in
recent years.
     "Italy France and Spain have benefited from that flexibility in recent
years - they can live with the system as it is," the official said.
     Such a negative reception for the review may prove a further blow to EU
efforts to streamline and strengthen the governance of the euro zone following
recent setbacks to ESM reform and Banking Union.
     The Commission is due to discuss the review on January 22 although some
sources suggested that its publication may not take place until early February.
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$E$$$,M$X$$$,MC$$$$,MT$$$$,MX$$$$,MFX$$$,MGX$$$]

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.