European Commission President Jose Manuel Barroso reiterated yesterday that the euro zone needed to move ahead with economic and monetary integration.
EUROPEAN Commission president Jose Manuel Barroso reiterated yesterday that the euro zone needed to move ahead with economic and monetary integration and outlined a proposal to allow states to reclassify some forms of expenditure.
“We will support an ambitious and structural approach which should include a road map and a timetable for a full economic and monetary union in the euro area,” Mr Barroso said in a speech in Brussels. He called for a timetable to reach full economic union in order to reassure investors about the future of the currency bloc.
Mr Barroso also hinted the European Commission might examine the possibility of allowing governments to treat public expenditure for investment differently to other debt.
“The commission will monitor the impact of tight budget constraints on growth, enhancing public expenditure, and on public investment.
“If necessary, the commission will give guidance on the scope for possible action within the boundaries of the European Union (EU) and national fiscal frameworks,” Mr Barroso said. “In the coming months, the commission will issue a report on the quality of public spending which will deal with this very important issue.”
The idea, which could allow governments to lower their official debtto-gross domestic product ratios by reclassifying some forms of expenditure, has been heavily promoted by Italian Prime Minister Mario Monti.
France is understood to be “sympathetic” to the proposal, but others are concerned that allowing governments to massage figures could undermine confidence.
Mr Barroso stressed the commission would demonstrate its application of the EU fiscal rules’ “inbuilt scope of judgment” when it issues economic policy advice to member states today.
“We will also set out our line on implementing the Stability and Growth Pact in a growth-friendly and differentiated way: applying its in-built scope of judgment, which focuses on structural sustainability of public finances over the medium term and takes into account the fiscal space and macroeconomic conditions of each member state,” he said.
Integration was an important confidence measure.
“We will support an ambitious and structural approach, which should include a road map and a timetable for a full economic and monetary union in the euro area.
“It is very important, even if you believe that it doesn’t come immediately, to define the trend, the objective. It is very important also in terms of confidence for the investment in the euro area now,” Mr Barroso said.
His comments were in line with those of European Council president Herman van Rompuy, who is also calling for greater EU economic integration along with German Chancellor Angela Merkel.
EU leaders asked last week for four highest-ranking EU officials, including Mr Barroso, to come up with ideas by the end of next month on how a move towards an economic union could be achieved for the euro zone.
Meanwhile, Spain has backtracked on a proposed plan to use government debt instead of cash to bail out Bankia, as Prime Minister Mariano Rajoy struggles to shore up the nation’s lenders without overburdening public finances. An economy ministry spokesman said on Monday the government was considering using an injection of Treasury debt instead of cash to recapitalise BFA-Bankia.
Spanish bond yields rose and investors criticised the idea, which the spokesman, speaking anonymously under ministry policy, said yesterday had become a “marginal” option for the ¤19bn rescue.
The government has said it is designing a mechanism to help regions regain access to capital markets. To avoid adding to the burden on the sovereign, the government is considering guaranteeing joint regional bond issues with regions’ tax revenue, three people familiar with the plans said. Reuters, Bloomberg