c.2014 New York Times News Service
c.2014 New York Times News Service
BRUSSELS — Top European Union officials on Monday warned governments across the bloc to do more to reform their economies to prevent a rerun of problems that fueled the region’s debt crisis and nearly destroyed the euro currency union.
The concern is that some countries, in particular France and Italy, are not moving fast enough to reduce their budget deficits. EU officials have already granted France extra time to meet the targets that all member countries have agreed to.
“The fundamental challenge for the EU now is political: How do we keep up support for reform as the pressure of the crisis recedes?” José Manuel Barroso, the president of the European Commission, the executive arm of the EU, said in a statement ahead of a news conference.
“If politicians show leadership and summon the political will to see reform through, even if it is unpopular, we can deliver a stronger recovery and a better standard of living for everyone,” he said.
The statement Monday was part of the annual budgetary review of targets for countries on deficit and debt levels, and on needed reforms in areas like pension systems, that are laid down by the authorities in Brussels. The reports cover 26 of the 28 member states of the EU, excluding Cyprus and Greece, which continue to receive rescue payments and are already under special, closer scrutiny.
The review comes at a delicate moment for the leadership in Brussels. Officials are under pressure to pare back intervention in national affairs since various anti-EU parties made big gains last month in elections to the European Parliament in a number of member states — and in France in particular.
The wave that swept populist and protest parties into the European Parliament was partly in response to deeply unpopular debt-slashing policies pushed by Barroso’s commission. Those policies have been aimed at saving the bloc’s flagship economic project, the euro, while minimizing the burden paid by big member states like Germany.
The authorities in Brussels have already begun the process of easing the toughest austerity requirements that caused so much hardship in countries like Greece, Portugal and Ireland. During the past year, the authorities have instead emphasized the need for governments to make thorough structural overhauls in areas like employment policies to make economies more competitive.
Much of the attention Monday was expected to have been on France, which has been slow to reform an economy plagued by weak growth and high unemployment. Last year, the commission gave the government in Paris an extra two years, until 2015, to get the budget deficit down to the EU limit of 3 percent of gross domestic product. Even before Monday, the commission had warned Paris that France did not seem likely to meet that deadline.
“These objectives could be at risk,” Barroso said during a news conference Monday, but added that France “still has time to introduce the necessary” changes.
“France has to make reforms to boost its competitiveness,” he said.
A key factor in France is whether the inroads by the far-right National Front during the recent election will make it harder for the Socialist government of President François Hollande to carry out plans that include both pro-business tax cuts and a squeeze on state spending. That concern could lead the Brussels authorities to redouble their exhortations to France to institute change — but at the risk of another sharp reaction from Hollande, who last year warned the commission against trying to dictate pension reforms.
Italy has also been in the focus because of a strong showing in the elections to the European Parliament by the center-left Democratic Party, led by Prime Minister Matteo Renzi.
Renzi still faces the task of devising a strategy to prune the country’s towering debt — which Morgan Stanley said could rise to 134 percent of GDP this year — while maintaining his new popularity.
A danger for Italy is that weak growth, feeble competitiveness and low inflation mean that the country’s primary budget surplus “isn’t yet sufficient to stabilize government debt,” according to a report by Daniele Antonucci, a senior European economist for Morgan Stanley.