|15/02/01, Volume 7, Number 07
EU FINANCE ministers issued a formal reprimand to Ireland, calling on the smallest member of the euro zone to take steps to reverse the 'pro-cyclical' portions of its 2001 budget. The rebuke was the first time the Union has used a formal system of 'peer pressure' to rein in domestic economic policies seen as detrimental to the single currency.
MINISTERS warned that the Irish budget passed in December risked exacerbating the nation's overheating economy, which already has the euro zone's highest inflation rate. “The Irish budget for 2001 is expansionary and pro-cyclical and therefore inconsistent with the Broad Economic Policy Guidelines,” they said in a joint statement. But Irish Finance Minister Charlie McCreevy quickly rejected the criticism. “Ireland does not believe that there are reasonable grounds for such a recommendation in relation to the Broad Economic Guidelines,” he said. “Nor is it, in my view, a proportionate or even-handed response.”
THE UK and Italy also faced criticism for domestic economic policies at the meeting. British Chancellor of the Exchequer Gordon Brown was told that the UK met budgetary, inflation and interest rate criteria for membership of the single currency. But ministers warned that his plans to pump billions of pounds into public services would not be in line with the “close to balance or surplus” requirement in the EU's stability and growth pact. Brown rebuffed this criticism, claiming that the investment was not only needed but was also justified by the slashing of British public debt.
ITALY was told that its budget deficit, which exceeded 1.3&percent; of gross domestic product in 2000, should be brought under control and that promised tax cuts should be matched by a reduction in spending. Italian Treasury Minister Vincenzo Visco cast doubts on the report, saying the EU needed to make sure it was abreast of the latest data before it drew conclusions.
MINISTERS approved a near €1 billion plan to deal with the EU's escalating mad cow crisis, but made it clear this would be the last time they dipped their hands into their pockets. “Ecofin underlined that changes in the financial planning are rejected,” said German deputy foreign minister Caio Koch-Wesser.
ECOFIN ministers also agreed a raft of exemptions from EU-wide fuel duty rates, bringing tax breaks offered to truckers during oil price protests last year into line with EU law. The decision, which will be formally ratified after scrutiny by the Union's legal service, ended a three-month dispute between Germany and countries that offered tax breaks to lorry drivers last year: France, the Netherlands and Italy. Under the deal the three countries must reduce the size of the tax breaks they offer next year. The deal also paves the way for around 100 reduced excise duty rates on mineral oil to be applied for another six years.
|Economic and Financial Affairs