News
BackThe attempts to solve the so-called “government debt crisis“ continue to be the focus of the debate between the political factions. This is the conclusion for the public hearing on evaluating the instruments to deal with the government debt crisis, which took place in the Committee on Economic and Monetary Affairs of the European Parliament on Monday and Tuesday. The dividing lines in respect of solving the current crisis are between a further consolidation of the budgets of the EU Member States on the Conservative-Liberal side and a fundamental restructuring of the EU rescue plans into a growth-oriented Marshall Plan for the entire EU, commented the German MEP of the S&D, Udo Bullmann. The representative of the European Commission, Marco Buti, continued to insist on the bureaucratic austerity measures. Klaus Regling, the German chief of the EFSF bailout fund, defended the harsh conditions imposed on the bailout countries in return for aid.
The old (EFSF) and the new (ESM) bailout fund
Klaus Regling, Head of the EFSF, who is in charge of the bailout programme for ailing Euro countries such as Portugal, Ireland or Greece, rejected the criticism of Green and Social Democrat MEPs that the bailout fund and the conditions of the aid programmes would be too harsh and hamper growth. After all, this would concern long-term structural reforms, which would only improve competitiveness after the budgets had been consolidated. For example, Ireland would be a good example to show that the country - as a consequence of the bailout programme - was once again paying a lower rate of interest to pay back her loans.
In his comments, Marco Buti, Director General for Economic and Financial Affairs at the European Commission addressed the new permanent bailout fund (ESM) that will come into force on 1 July 2012. In contrast to the EFSF, this fund will be solely administered by the European Commission: that means that the Commission raises money on the markets for cash-strapped countries, which it will then, practically free of risk, pass on to them - a novelty in the history of the Union. The initial lending volume of the ESM will be ca. EUR 500 billion, whereby a revision clause might boost its size through EFSF funds or other sources - the European Council will come to a decision in March, said Buti. Buti too did not see a contradiction between budget discipline and growth, as it was important to tackle the debts of the EU countries first in order to provide them with ideal conditions for accessing capital on the markets.
In contrast, Andreas Botsch, representative of the European Trade Union Institute (ETUI), took a completely different approach: the purely expenditure-related measures were not only inadequate. Germany and France had tried this approach in the past decade and then had been the first to break the Stability and Growth Pact 2003/04. The large differences in the interest rates for government bonds were proof that the EU bailout funds and programmes did not work. Europe was in a liquidity crisis and the crisis summit diplomacy would just delay everything. If action was not taken soon, one had to expect massive bankruptcies and capital drains. The role of the ECB as genuine lender of last resort also had to be considered. With regard to evaluating the macroeconomic imbalances in the EU countries, Botsch was also commenting on the lack of the unit of labour cost factor, which played a significant role in particular in respect of growth. Apart from that, the macroeconomic dialogue, which existed since 1999, and focused above all on wage development and distribution, had to be strengthened at European level. What was needed was a macroeconomic perspective throughout Europe. However, the Council that is led by the national interest only was opposed to this objective.
However, the inter-governmental fiscal pact, which will probably come into force at the end of January, was above all a thorn in the side of Elisa Ferreira (S&D), as she was significantly involved in ensuring that the measures to boost growth were not be short-changed at community level in the so-called “Six Pack” for a closer economic governance of the EU countries. Now, the EU Member States were once again backing a unilateral austerity policy, which might even accelerate the downward spiral.
Klaus Regling, Head of the EFSF, who is in charge of the bailout programme for ailing Euro countries such as Portugal, Ireland or Greece, rejected the criticism of Green and Social Democrat MEPs that the bailout fund and the conditions of the aid programmes would be too harsh and hamper growth. After all, this would concern long-term structural reforms, which would only improve competitiveness after the budgets had been consolidated. For example, Ireland would be a good example to show that the country - as a consequence of the bailout programme - was once again paying a lower rate of interest to pay back her loans.
In his comments, Marco Buti, Director General for Economic and Financial Affairs at the European Commission addressed the new permanent bailout fund (ESM) that will come into force on 1 July 2012. In contrast to the EFSF, this fund will be solely administered by the European Commission: that means that the Commission raises money on the markets for cash-strapped countries, which it will then, practically free of risk, pass on to them - a novelty in the history of the Union. The initial lending volume of the ESM will be ca. EUR 500 billion, whereby a revision clause might boost its size through EFSF funds or other sources - the European Council will come to a decision in March, said Buti. Buti too did not see a contradiction between budget discipline and growth, as it was important to tackle the debts of the EU countries first in order to provide them with ideal conditions for accessing capital on the markets.
In contrast, Andreas Botsch, representative of the European Trade Union Institute (ETUI), took a completely different approach: the purely expenditure-related measures were not only inadequate. Germany and France had tried this approach in the past decade and then had been the first to break the Stability and Growth Pact 2003/04. The large differences in the interest rates for government bonds were proof that the EU bailout funds and programmes did not work. Europe was in a liquidity crisis and the crisis summit diplomacy would just delay everything. If action was not taken soon, one had to expect massive bankruptcies and capital drains. The role of the ECB as genuine lender of last resort also had to be considered. With regard to evaluating the macroeconomic imbalances in the EU countries, Botsch was also commenting on the lack of the unit of labour cost factor, which played a significant role in particular in respect of growth. Apart from that, the macroeconomic dialogue, which existed since 1999, and focused above all on wage development and distribution, had to be strengthened at European level. What was needed was a macroeconomic perspective throughout Europe. However, the Council that is led by the national interest only was opposed to this objective.
However, the inter-governmental fiscal pact, which will probably come into force at the end of January, was above all a thorn in the side of Elisa Ferreira (S&D), as she was significantly involved in ensuring that the measures to boost growth were not be short-changed at community level in the so-called “Six Pack” for a closer economic governance of the EU countries. Now, the EU Member States were once again backing a unilateral austerity policy, which might even accelerate the downward spiral.