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The debt crisis in Greece and the haggling by the EU Member States about the rescue package associated with it, have revived the discussion about the unequal economic development with the European Union. Whilst the Chamber of Labour supports an alternative approach to budget consolidation, which aims at growth, employment and distribution, the European Commission in its latest Communication is above all in favour of enforcing the adherence to the stability pact more rigidly.

Crackdown in budget matters

The first priority of the Commission Communication concerns the stricter adherence to the stability and growth pact. The states had accumulated excessive debt by taking economic policy measures and making available bank rescue packages. Now the time had come to become more austere in order to prevent situations as Greece is experiencing now from happening. “The Member States should ensure the existence of effective budgetary frameworks at national level. Repeated infringements against the pact should be subject to accelerated proceedings”, states the Commission. The EU should be able to use increasingly more budgetary sanctions as an enforcement tool.

Supervision, analyses and recommendations

In addition to combating national budget deficits, tools should be implemented, which could aid the supervision of macroeconomic imbalances and the development of competitiveness. The introduction of a so-called “European Semesters” should help the Member States with planning their budget. “Early guidance at the beginning of each year from the European Council on economic policies would facilitate the preparation of Stability and Convergence Programmes and National Reform Programmes.”

The Chamber of Labour warns against rushing in to impose rigid austerity programme. This would bring with it the danger of a renewed recession. Reducing debts via spending cuts could damage both growth and employment.

Further Information:

Press release of the Commission