Finnish economist: EU deal keeps budget policy in hands of member states
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The agreement hammered out by ministers of finance of the countries of the European Union on changes to the EU’s Stability and Growth Pact is seen by a leading Finnish economist to strengthen the hand of individual member states in financial policy.
According to Jukka Pekkarinen, head of the Labour Institute of Economic Research, the compromise reached on Sunday brings significant changes to the pact.
In 1996 and 1997 Pekkarinen chaired a working group of experts which assessed the likely impact of Finnish membership in the European Economic and Monetary Union.
"It would seem that finance policy will remain in the hands of the member states", Pekkarinen said on Monday.
In its original form, the Stability and Growth Pact gave the EU the possibility, in principle, to influence the budgetary policies of individual member states.
Although he does not feel that the loosening of the pact will lead to an immediate crisis, Pekkarinen predicts that "exciting times" are ahead.
"Hopefully attention will be focused on long-term challenges", Pekkarinen says, noting that all industrialised countries share the same concern: the ageing of the population means that keeping the public economy on a sustainable foundation is a growing challenge.
Similar thoughts were expressed by Finance Ministry official Martti Hetemäki. He points out that companies assessing the creditworthiness of different countries are taking a closer look at what risks the countries face. Budgetary excess can lead to a poor credit rating and higher in interest rates on state borrowing.
"The threat of market reaction is perhaps the ultimate factor that keeps implementation of the new Stability and Growth Pact under control."
The Chairman of the Parliament’s Grand Committee, National Coalition Party MP Jari Vilén, takes a pragmatic view of Sunday’s agreement.
"An agreement that exists but is not followed is more harmful than one that is more flexible."
Martti Hetemäki agrees:
"The credibility of the pact has suffered during the past few years from the way it has been implemented."
The large member states Germany and France have not been as disciplined as the terms of the original pact would have required, even though the public deficits in both countries have exceeded the three percent level during three consecutive years.
Both Hetemäki and Vilén are glad that the EU finance ministers did not change the basic principles of the pact; the requirement remains that the public deficit should not exceed three percent.
Helsingin Sanomat
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| 22.3.2005 - TODAY |
 Finnish economist: EU deal keeps budget policy in hands of member states
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