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EcoFin: the excessive power of the big states

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The EU's economic ministers have agreed on the deficit policy: Italy is acquitted while the 7 countries of the New Europe are condemned. How can this be explained?

Last Monday, members of the EcoFin Council met up to discuss the application of the 'early warning' requested by the European Commission against Italy, guilty of a budget deficit equal to 3.2% of the year’s GDP: It is barely 0.2% over the agreed limit, but it is enough for Italy to receive an 'official warning' before the application of real and proper sanctions. Together with Italy, the summit of Finance Ministers was to discuss the similar situation faced by 6 newly joined countries and by the 'old' member states Greece and the Netherlands.

Welcome to the latest political puppet show

Berlusconi’s presence at EcoFin helped Italy to escape the formal 'warning', just like France and Germany on 25 November 2003, on the basis of outlined measures concerning 7.5 billion euros. EcoFin has actually believed the promises of a PM who has pushed the third economic power of Europe towards a barrel of tax exemptions and stopgap measures, and whose principal weapon of domestic politics is an astonishing hypothetical quantum of tax reduction!

The excessive deficit procedure has, however, been set in motion against Greece (Holland having accepted the measures proposed by the Commission). But why? Greece, after all, had a deficit similar to that of Italy, with a smaller public debt. On the eve of the Italian promises, commentators noted the experts’ scepticism and the politicians’ optimism. Luxembourg’s PM, Jean-Claude Juncker, declared that 'the decision will not harm Italy'. Interesting certainties. And, surprisingly, the fact that Berlusconi is acting as Finance Minister following the resignation of Giulio Tremonti, is seen as an ‘encouraging’ measure by Gerrit Zalm, the Dutch Finance Minister.

Unnecessary Humiliation

EcoFin has instead approved the 'early warning' for Cyprus, Czech Republic, Hungary, Malta, Poland and Slovakia: bad luck for those countries that are having difficulty adapting their changing economies to EU's criteria. The very same EcoFin has decided not to impose sanctions just for this reason. So why not avoid this unnecessary humiliation in their confrontations? It’s simple: the 'technical' criteria of the Stability and Growth Pact have become a piece of wastepaper by now. The Pact is a power game for big states that decide who is 'virtuous' and who is not.

It’s precisely in order to restore credibility to the Pact that the Commission, according to Joaquín Almunia’s statements, intends in the short term to play the complex reform card. Nevertheless, it will be difficult to take away the right of veto from the big states.

Translated from Ecofin: lo strapotere dei Grandi