BRUSSELS (Thomson Financial) – The European Commission said it is of the ‘utmost importance’ that national governments in the EU use the current economic recovery to improve their public finances, and added that the preventative element of the stability and growth pact needs to be ‘more effective’.
‘Although the budgetary situation has improved remarkably in the last few years, it is quite clear that most member states need to improve their track record in implementing their budgetary targets,’ said Joaquin Almunia, Economic and Monetary Affairs Commissioner.
The commission said in its report that whilst the corrective part of the stability and growth pact — which enables the commission to fine member states who fail to comply with its requirements — is working, the preventative part ‘is not functioning as well’.
It has therefore set out proposals to change the way governments formulate and apply budgetary strategies over the medium term, and has also called for strengthening of surveillance and coordination of economic and budgetary policies at a European level.
‘The main thrust of the first set of proposals is to broaden the scope of the EU’s fiscal surveillance,’ said the commission, adding that fiscal surveillance should be put into a broader economic perspective, and focus more on internal and external imbalances that may pose a risk to fiscal and economic stability.
It added that there is ‘considerable scope’ for strengthening the link between national budgets and the targets presented at the EU level.
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