EU economic and monetary affairs commissioner Pedro Solbes is proposing more flexibility in the EU's stability and growth pact for countries with sound public finances. According to a report in the Financial Times (FT), the aim of his reforms, expected to be approved by the European Commission on Wednesday, is to allow such member states to invest more to boost employment and growth. However, Solbes is also advocating sanctions against countries with stubbornly high levels of debt as well as measures to stop governments implementing unfunded pre-election spending, the newspaper reported.
More flexibility in the implementation of the stability pact would most benefit Ireland, the Netherlands, the UK, the Nordic countries and most of the 10 candidates for EU membership. Senior commission officials said they were told the reforms would not "let off the hook" France, Germany, Italy and Portugal, the member states with the worst fiscal problems, the FT reported. The proposal also allows the EU to issue warnings to countries embarking on "pro-cyclical loosening of fiscal policy", such as pre-election tax cuts during an economic upturn. //www.fxcentre.com