A Balance for the EU

The European Economy is undergoing a crisis, and the worse is yet to come, but a recovery is expected already by 2010. In the meantime national governments must take action in supporting enterprises, consumption and markets, without losing control of public accounts. Further focus must be concentrated especially on the countries who have overshoot the Maastricht limits, by “flexibly” applying the Stability Pact. Finally, the situation in Eastern Europe must be closely monitored, since the recession’s consequences are worse than expected.These are some of the issues that emerged on Wednesday, February 18, when Commissioner for Economic and Monetary Affaires, Mr. Joacquin Almunia, presented the updated to the Stability and Convergence Programmes, of 17 EU States, 8 of which belong to the euro zone. The Spanish politician clearly highlighted the “difficult” situation and need to re-launch economies “without neglecting public accounts sustainability”. The “annual review of these programmes – Mr. Almunia explained, must be measured with the countries’ response to the recession”. He also added that “the Stability and Growth Pact is the keystone of our financial system”, even if “it can be applied with the flexibility we ourselves introduced in 2005”. “The Pact is not a sanction” and “today it is important to support credibility even by applying procedures and rules to come out of this crisis together”.The Commission President, Mr. Barroso stressed the urgent need for “targeted, timely and effective” measures, assessing that support to national economies should at least be equal to 1.5% of the European GDP. The Commission’s overall goal is to re-establish a sound, regulated economic growth even within the initiatives taken at international level. The EU will continue to address these issues in the extraordinary meeting scheduled for March 1 and during the Spring Summit, March 19 and 20. These issues will be addressed “world-wide” at G20 in April and G8 in July.However, while the Commission promises flexibility in applying the Stability Pact, infringement procedures for excessive deficit” have been started towards six countries- France, Spain, Greece, Ireland, Latvia and Malta-, that in 2008 exceeded the 3% ratio between public deficit and GDP. Other countries that will exceed the Stability Pact limits in 2009 are closely monitored. During the presentation of the emergency plan review, Mr. Alumnia spoke of the situation in Eastern Europe. During the press conference, he said that a specific Community program for Central and Eastern Europe (strongly backed by Austria) is still not underway. The Commissioner said he shares the concerns of some private credit institutes that invested in Rumania, Croatia, Ukraine and Serbia. This comment shows how the Commission is worried about the development of the crisis in the recent accession countries. Problems in many businesses, jobs, increase in taxes and prices, have led in the last weeks to riots and demonstrations in Bulgaria, Rumania, Baltic Republics Poland, and Hungary. Signals of a new recession front.