BRUSSELS (MNI) – European Union Economics and Monetary Affairs
Commissioner Olli Rehn on Saturday suggested that Brussels could be
flexible in its application of the EU’s fiscal rules and called for a
European Investment Pact to help stimulate the continent’s struggling
economies.

“Contrary to the misleading impression promoted by some politicians
and pundits that the EU fiscal framework forces all member states into a
‘one-size-fits-all’ consolidation straightjacket, the Stability and
Growth Pact is not stupid,” he said in a speech.

“Yes, the EU fiscal framework is rules-based, with clear reference
values for public deficit and debt for triggering the excessive deficit
procedure and, if needed, sanctions. But, at the same time, the Pact
entails considerable scope for judgement, based on economic analysis and
its legal provisions, when it comes to its application.”

“The Pact underlines the structural sustainability of public
finances over the medium term and implies differentiation among the
member states according to their fiscal space and macroeconomic
conditions,” said Rehn.

From the start the EU has shown signs that it would apply its new
fiscal rules with discretion, going tough on countries within close
reach of their targets such as Belgium, and easier on countries such as
Spain, which renegotiated its fiscal deficit target for this year.

Rehn’s speech is the latest from a senior EU official suggesting
that after two years of focusing on measures to instill fiscal
discipline, the EU is increasingly turning its focus to growth.

ECB President Mario Draghi last month made a similar call for a
“European Growth Compact” consisting primarily of structural reforms.

On Sunday French voters spurned Nicolas Sarkozy, one of the
architects of the EU’s current crisis strategy, for socialist Francois
Hollande, who has vowed to renegotiate Europe’s hard-fought fiscal rules
to include more references to growth.

Speaking in Brussels, Rehn said that the Commission’s proposal for
‘project bonds’ through which EU money would be used to attract private
investors in infrastructure projects, more targeted use of EU
development funds, and a stronger European Investment Bank, could “be
combined to create a European investment pact”.

“We need to enhance public investment and use it in a smart way to
unlock further private investment,” Rehn said. “While the single market
remains our main growth engine, this kind of investment pact could
provide necessary additional fuel for the engine.”

In addition to these measures, which the Commission has been
promoting over the last year, the EU executive’s promotion of structural
reforms and plans to tackle remaining barriers in the EU’s internal
market, show the Commission’s commitment to boosting economic growth
alongside fiscal consolidation, he said.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com

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