IN THE RADICAL PRESS / HUMANITE
It’s done. Francois Hollande announced this afternoon that he would submit the fiscal pact (Treaty on the stability, coordination and governance in the Economic and Monetary Union – TSCG) to be ratified by the French Parliament. During his Presidential campaign he had promised to renegotiate it and would not agree it without an added growth component which he has urged on fellow EU leaders over the past week. The TSCG, which forbids government to have structural deficits greater than 0.5%, is the culmination of austerity policies negotiated in Brussels for four years.
The ratification of the treaty will be included in a gift-wrapped package that Francois Hollande will submit to the National Assembly and Senate. French MPs are to vote on a package containing the TSCG, European banking supervision, which is still being negotiated but which was agreed on Friday, the tax on financial transactions that should come before the end of the year, and the Growth Pact. Such a package should help to silence recalcitrant Socialist deputies.
‘In the presidential campaign,’ argued Hollande, ‘I wanted to renegotiate the treaty to put in it what was not there: the growth and stability measures for the medium term.” However, there is no prospect, according to Francois Hollande, that he will include the ‘golden rule’ [or “debt-brake” that limits structural deficits to 0.5 percent of national output] in the Constitution. Instead, he favours a law on deficit reduction.
What is this growth pact? The ‘Pact for Growth and Jobs’ is a European investment program worth 125 billion euros, or 1% of European GDP. Of which, 55 billion will come from unused structural funds. The European Investment Bank has 60 billion more. In addition, 5 billion euros of projects bonds, to finance infrastructure, will be issued in the markets.
So much for the packaging. Presented as a counterweight to the austerity included in the [Fiscal Pact] TSCG, it is actually a complement. The first section of the text points out that because of growth strategy, ‘new tools for economic governance should be fully utilised.’ This is the European Semester – recommendations from the Commission that European countries must adhere to since the adoption by the European Parliament’s six-pack package [of Commission surveillance of national budgetary and economic policy and further economic policy coordination] last year. The two-pack legislation [which builds on the ‘six-pack’] must be ‘promptly adopted’ say the Council conclusions. This text will allow the European Commission to intervene in the budget debate in the Member States, basically giving it powers to table amendments to national budgets.
Another highlight of the summit: the pressure applied by the Spanish and Italian governments, Mariano Rajoy and Mario Monti. The first obtained a Spanish bank recapitalization by the European rescue fund, without this being accounted for in the national public debt. The second finally secured the possibility for countries to have their debt acquired in the secondary market by the European rescue fund. If interest rates on Italian debt, now over 6%, were to decrease, the country would not use this new facility. All countries using these new tools must follow the demands for budgetary and structural reforms that will be made each year the Commission.