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The Commission’s proposal for the budgetary policies of EU countries has arrived: worse than before

Finally, so to speak, the Commission has given birth to its own proposal relating to the coordination of budgetary policies in EU countries. It must be admitted that Commissioner Gentiloni was right yesterday in affirming that the proposal would have satisfied Berlin. Indeed, the proposal, at a first reading, will satisfy Berlin, because it maintains the unrealistic targets of 60% debt/GDP and 3% deficit, in a situation where euro area countries have a 92% debt/GDP ratio , which condemns the EU (except Germany…) to long years of recession in an attempt to achieve now unrealistic goals.

Those who expected a step forward towards softer policies must think again. On the contrary, the power of the Commission is strengthened. It suffices to read how the "European Semester" is defined, the Soviet process of defining, one year after the next, the following year's budget with approval by the Commission. A useful process in a perfect world where nothing happens, an intuitional exercise that exposes us to any criticism in the reality of a world that changes day by day. Here is the proposed text.

The European Semester includes
(a) the formulation and monitoring of the implementation of the broad guidelines for the economic policies of the Member States and of the Union, in accordance with the provisions of the Treaty of Lisbon. for the economic policies of the Member States and of the Union in accordance with Article 121(2) TFEU, the country-specific recommendations and the recommendation on the economic policy of the euro area;
(b) the formulation and monitoring of the implementation of the employment guidelines to be taken into account.
which Member States have to take into account pursuant to Article 148(2) TFEU. including the European Pillar of Social Rights, and related country-specific recommendations.
(c) the submission, assessment and approval of Member States' medium-term budgetary structural plans, as well as their monitoring through the annual progress reports;
(d) surveillance to prevent and correct macroeconomic imbalances pursuant to
Regulation (EU) no. 1176/2011;
(e) other multilateral surveillance procedures established by the European Parliament and the Council pursuant to Article 121(6).
Council pursuant to Article 121(6) TFEU.

Thus the freedom of countries to formulate their own budgetary policies is strongly compressed and compromised: when the main decision-making tool of democracy, i.e. the definition of the budget, is wrested from the bodies expressed by the vote and assigned to a higher body that is not democratically elected. What is the use, at this point, of going to vote for a government that at the most decides, if all goes well, the color of the trams?

The direction of the public budget is single, restrictive. Article 6 specifically states:

The technical trajectory must ensure that:
(a) the government debt-to-GDP ratio is or remains on a plausibly downward path, or remains at levels
conservative levels;
(b) the government deficit is brought and maintained below the 3% of GDP reference value 3% of GDP reference value;
(c) the fiscal adjustment effort over the medium-term fiscal structural plan period is at least proportional to the total fiscal adjustment effort over the entire adjustment period.

The possibility of carrying out an expansive policy does not exist, not even theoretically. One can only reduce the debt, more or less, depending on how much the fee indicates. They are rules written for perfect times of permanent growth that do not exist, have never existed and, above all, will no longer exist in a future of European economic decay.

Here we don't want to explain the whole proposal to you, but let you understand its nature. One thinks only of the restriction and compression of the economy, when the rest of the world thinks instead of expanding. Debt reduction through growth remains just a sort of fig leaf from the Commission, but, in reality, it looks like nobody believes it. The beauty is that none of you voted for this type of policy and, in words, nobody wants it. In words, of course.


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The article The Commission's proposal for EU countries' budgetary policies has arrived: worse than before comes from Scenari Economici .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/arrivata-la-proposta-della-commissione-per-le-politiche-di-bilancio-dei-paesi-ue-peggio-di-prima/ on Wed, 26 Apr 2023 14:31:09 +0000.