EC Assessments of Budgets

The European Commission have published their assessments of the draft budgets from the 16 eurozone countries covered by the assessment (programme countries Greece and Cyprus are not involved).  Of the 16, five were judged as “compliant” by the Commission (shown in green below).

A huge amount of material is available here.  For Ireland there is the:

The Commission have also published the Alert Mechanism Report as part of the Macroeconomic Imbalance Procedure. There is also the Statistical Annex from which Ireland’s scorecard is extracted here and shows four “imbalances” with house prices likely to add a fifth.  The “auxiliary indicators” may also be worth a glance.

This is still early days for the European Semester but at the moment it feels a little like a blizzard covering everything.  It seems to be designed on the maximin principle – by including everything they can’t be accused of missing anything.  The problem is that the important points may get lost in the noise.

16 replies on “EC Assessments of Budgets”

The most important point likely to be lost in the blizzard is the outcome of the tug-of-war between Paris and Berlin, with Rome in the middle, on the Juncker investment programme to help ensure European economic recovery. The argument appears to boil down to whether or not there should be new money to support the programme: with Germany picking up the major part of the bill!

The issue is to be decided at the next European Council (as per the conclusions of the October meeting).

“8. To pave the way towards a strong sustainable economic recovery, Europe needs to invest in its future. Low investment today erodes tomorrow’s growth potential. The European Council supports the incoming Commission’s intention to launch an initiative mobilising 300 billion euro of additional investment from public and private sources over the period 2015-2017. We need to encourage full use of all existing and allocated EU resources. The European Council welcomed the establishment of a Task Force, led by the Commission and the European Investment Bank, with a view to identifying concrete actions to boost investment, including a pipeline of potentially viable projects of European relevance to be realised in the short and medium term. It invited the Commission and the Council, in close cooperation in particular with the EIB, to take this investment initiative forward without delay, and to report to the European Council in December.”

There is little doubt as to which side of the argument Ireland is on.

It may be noted that Berlin has already let it be known that it would also not support sanctions, which is a different matter to continuing to pursue the objective of getting Paris to stick to its agreed EU budgetary last. As the former Secretary-General of the DOF pointed out on the RTE radio business programme this morning, the difference between bigger and smaller economies boils down to the former being able to raise money more easily than small ones, with the lenders to the latter also having a greater facility to move their money elsewhere. Protestations about unequal treatment will not change this fact.

France has been under the Excessive Deficit Procedure since April 2009 and the original deadline of 2012 (to get the deficit below 3% of GDP) has been extended twice, with the latest to 2015.Under France’s Draft Budgetary plan the deficit in 2014 is estimated at 4.4% in 2014 and projected at 4.3% in 2015 although France’s equivalent of IFAC has deemed the Governments’ growth projections for next year as too optimistic. The outcome?
The EC ‘invites the authorities to take the necessary measures within the national budgetary process to ensure that the 2015 budget will be compliant with the Stability and Growth Pact’

@ Ernie

A breath of hot air, maybe?

“France gets a lot of bad press, with much talk in particular about its supposed loss in competitiveness. Such talk greatly exaggerates the reality; you’d never know from most media reports that France runs only a small trade deficit. Still, to the extent that there is an issue here, where does it come from? Has French competitiveness been eroded by excessive growth in costs and prices?”

The answer is yes. In the same period, the percentage of manufactures in German GDP has doubled!

Speech here from ECB’s Lautenschlager
( delivered at the weekend saying that ECB buying of Government debt is problematical and that the Bank does not have a target for its balance sheet. So overall fiscal policy in the euro zone will be neutral at best in 2015, Juncker’s investment plan is a (bad) joke and monetary policy may well be at its practical limits. That leaves lower oil prices to provide a stimulus.

That “rules” in this instance do, indeed, create an enormous amount of “noise” which may serve to obscure the underlying political tussles. For example, Wolfgang Munchau dismisses the Juncker initiative under the heading that “it will not revive the eurozone”. There can be no serious expectation by those having to agree it that it can. On the other hand, it could provide the catalyst for a meeting of the European Council where all i.e. including David Cameron, could declare victory and give the EU as a whole an important psychological boost. The Tory right is already on to this decrying through the Telegraph (Peter Oborne) the supposed willingness of Cameron to “bail-out” the euro. However, if he gets some agreement on the thorny issue of the control of free movement – or, at least, one on which he could claim progress – the situation might be different.

The eurosceptic think-tank Open Europe has been a driving force in the debate on immigration and has produced this paper. It is internally inconsistent, of course, as it has to accept that there is, in fact, little or no benefits tourism in the case of the UK and fails to recognise that free movement is what it says it is; just that. The approach contains many attractions, nevertheless, for both France and Germany, especially in terms of outflanking their respective extreme right political movements.

It is also rather odd that the boost that falling energy prices is likely to give – to consumer demand in particular – is getting very little attention, a point adverted to in today’s IT by Chris Johns (with his usual capacity to be ahead of the general debate).

I would have thought that ‘ total number employed’ as distinct from the unemployment rate is a more important indicator of Ireland’s economic health .


What is becoming apparent here is that the new rules for the Eurozone unfortunately do not work. Several member countries are going to be in breach of the rules, and nothing much is going to happen. Any hope that “market discipline” could be replaced with Commission oversight is disappearing: France and others will flout the rules precisely because the markets are once again happy to lend to one and all!

@ skeptic01

I do not think that there was ever any real belief that market discipline could be replaced by Commission oversight. One is as weak as the other when it comes to dealing with the sovereign debt of the large countries, as the euro crisis has clearly demonstrated. The only thing that will work is the acceptance by the electorates of the countries concerned of the need for structural reforms and the willingness of governments to bring them about. This is what Juncker had to say in his recent interview.

“We will see in the coming months both Italy and France will undertake a huge range of structural reforms. But this is not only about promises. What I was insisting on in my talks – and I have three or four in the last six weeks with Hollande and with Matteo Reniz – is that I want to have not only promises but a clear calendar, with clear indications when national cabinets will adopt reforms, when national parliaments are supposed to adopt reforms. A government cannot dictate to a parliament when it has to vote in favour of this or that, but can nevertheless indicate its own intentions to submit to parliament a certain number of reforms.”

It is the best that can be hoped for in terms of institutional action as there is clearly little likelihood that the ECB will embark on QE over German objections, a fact to which DMcL has drawn attention.

It may be that the economic ship will right itself with little really sensible intervention from the bridge (as seems to be happening in Ireland’s case).

re: Lautenschlager speech: [Posted by Dan Mclaughlin, above]

Very depressing stuff.

“The Eurosystem is currently faced with 18, soon to be 19, issuers of government securities. Should we not take into account during a broad purchase programme of securities the fact that government securities in the euro area are not without credit risk? There are very few shared competencies in fiscal policy. As long as this is the case, the ECB’s purchase of government securities is inevitably linked to a serious incentive problem.”

We are back at square one. The only issue at play it seems are credit risks, and legal niceties. Bini-Smaghi could have penned the same speech six years ago. He may have been a bit more blunt, but the message is the same.
One wonders how long more Europe will put up with this.

Lower Crude Prices – will ‘goose’ consumer demand?

How? The lead-in time is months – except for transport, home heating and oil-fired electricity generation. The latter is the exception, behind coal, then gas. And, you know what: the major oil producers need lower prices? Like a hole-in-their-heads they do! The lowered crude price is in respect of ‘olde wells’ only. And the more they force-drive these old production wells, the faster their decline-rates. Then its bye-bye cheap oil. Not funny.

“For Ireland, lower oil prices will boost growth.” Jesus wept, here we go again with this ‘growth’ rubbish. This is what economic growth actually means – in reality, in the real world of real people and with real natural resources – and real physical constraints! Enjoy, and please forget to tell me where the problems is/are.

Economic Growth (aka: Permagrowth) is defined as :-

“The steady (long-term) advancement in overall economic activity mandates a parallel (simultaneous) steady advancement in population: a steady advancement in food production: a steady advancement in the production and consumption of fossil fuels: a steady advancement in the supply of fresh water: a steady advancement in the supply of arable and residential land ….”

“Whah?” “Whah ye onnah ’bout?”
“Yes dear, that’s economic growth”
“That’s completely mad!”
“Indeed it is.” “But the ‘Invisible Hand’ and the ‘Mythical Market’ will rescue us – all it requires is that there be a steady advancement in psychological sentiment.” “Bye-the-bye, what did you ask Santa for Christmas?”
“Excuse me! I need some strong drink!”

Methinks the colourful aesthetic graphic, as a post-post-modernist arepresentation of Angela’s Nonsensical Fiscal Corset, might have been submitted for The Turner Prize!

A 54-minute Marxist meditation has just won Duncan Campbell the Turner prize. The artist tells Charlotte Higgins about the dialectics of Christmas stockings, his Das Kapital reading group with Michael Clark – and picking a fight with the British Museum

‘Gone is the era – if indeed it ever truly existed – when winning the Turner prize was a pecuniary treat for an already wildly wealthy artist. Duncan Campbell, the Dublin-born, Glasgow-based film-maker, reckons he can “easily” make the £25,000 prize money work “for a year, a year and a half”. He would be lying, he says, “if I said my work flew off the shelves”. Making his kind of work – for which there is “limited demand” is “not good economics”. In his acceptance speech at Tate Britain on Monday night, the artist told an anecdote about his countryman WB Yeats: when the poet was telephoned by a journalist informing him that he had won the Nobel prize, he had without a flicker asked: “Do you know how much it is?”

The Desert of the Real!

Ireland is a deprivation nation.

All manner of numbers and stats regarding growth and employment numbers are thrown around which feeds into the illusion of the ‘Celtic Phoenix’. But there is a grim reality – which doesn’t feature much in the popular debate: we are a society riddled with high levels of poverty and deprivation. And recent EU Commission data shows we have much higher levels than most other comparable EU countries.

… This is pretty staggering. While it is not surprising to see Greece with the highest level of material deprivation, Ireland is right up there at the top – marginally behind Italy but ahead of poorer countries like Portugal and Spain. Material deprivation in Ireland is 58 percent higher than the EU-15 average.

•There are over 1.1 million people in Ireland living in material deprivation – a quarter of the population.

… There are 450,000 people in Ireland living in ‘severe’ material deprivation – or one-in-ten people.

… •There are over 380,000 children living in material deprivation – nearly one-in-three children. This figure has more than doubled since the onset of the recession.
•There are 150,000 children living in severe material deprivation – one-in-eight children in the state.

Let’s cut to the chase: one million people living in deprivation, nearly one-in-three children suffering deprivation, is an economic, social and moral indictment of the priorities of a government that privileges tax cuts over poverty-reduction. There is no indication at all from Government Ministers that this is even an issue. All we get is practiced responses that avoid the issue. A cut in taxation for people on incomes of €70,000 is on the agenda; cuts in poverty and deprivation are not.

The Hibernian Corset is very becoming – Svelte, Slim, Thin, Hungry!

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