Sunday, 7 August 2011

Olli Rehn asserts budget consolidation and structural reform

The EU commissioner for economic and monetary affairs, Olli Rehn, Friday tried using reason with regard to the eurozone bond market turmoil:

Ongoing developments in the eurozone; 5 August 2011 SPEECH/11/540

According to Rehn, the latest market run on members of the euro area is not reasonable:

The spread of bond-market tensions across the euro area is, however, not justified by economic and budgetary fundamentals. Economic recovery is proceeding in most parts of the euro area, while important steps in budgetary consolidation and structural reform are underway across Europe and in particular in those Member States most exposed to market tensions.

My blog entry Rehn asserts eurozone recovery concluded that the commissioner had documented his case regarding growth, in the European Union as a whole and Cyprus, Italy and Spain specifically. (Naturally, if the markets turn ugly enough, anything can happen.)

I noticed that fellow blogger Protesilaos Stavrou fired a new broadside at the EU leadership - including José Manuel Barroso, Herman Van Rompuy and Olli Rehn – for ”challenging reason and real world facts”.

Should we look a bit more specifically at Rehn's assertion about budgetary consolidation and structural reform?


European Semester

The European Commission started the first beefed-up and streamlined planning cycle called the European Semester by a 12 January 2011 communication from Rehn's DG Ecfin. The AGS is available in 22 official EU languages; here the English version:

Annual Growth Survey: advancing the EU's comprehensive response to the crisis; Brussels, 12.1.2010 COM(2011) 11 final (10 pages)

DG Ecfin offers all interested readers an informative web page Stability and Convergence Programmes (or updates) and National Reform Programmes 2011, where you can find links to the national programmes for sustainable public finances (Stability and Growth Pact SGP) and for growth-enhancing reforms in line with the Europe 2020 strategy.

Although you have to look separately for intermediary stages, such as European Council conclusions and contributions by various Council configurations, there are links to the Commission staff working papers and proposed recommendations for the euro area and for each member state (including Cyprus, Italy and Greece).

The Ecofin Council concluded the first European Semester by issuing recommendations regarding both budget consolidation and structural reforms, exactly six months after the publication of the AGS.

Having been published in the Official Journal of the European Union, these recommendations and opinions are available in the EU language of your choice:

COUNCIL RECOMMENDATION of 12 July 2011 on the implementation of the broad guidelines for the economic policies of the Member States whose currency is the euro; OJEU 23.7.2011 C 217/15

COUNCIL RECOMMENDATION of 12 July 2011 on the national reform programme 2011 for Cyprus and delivering a Council opinion on the updated stability programme of Cyprus, 2011-2014; OJEU 16.7.2011 C 210/12

COUNCIL RECOMMENDATION of 12 July 2011 on the National Reform Programme 2011 of Italy and delivering a Council opinion on the updated Stability Programme of Italy, 2011-2014; OJEU 21.7.2011 C 215/4

COUNCIL RECOMMENDATION of 12 July 2011 on the National Reform Programme 2011 of Spain and delivering a Council opinion on the updated Stability Programme of Spain, 2011-2014; OJEU 19.7.2011 C 212/1

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Having read the AGS and the recommendations and opinions, I invite readers to demonstrate where Rehn went over board in his assertion about budgetary consolidation and structural reform. (Again, a stampede can obliterate the worthiest intentions.)



Ralf Grahn