Public finances in the EMU - 2007-2008 (short presentation) 
President
The next item is the report by Mrs Gottardi, on behalf of the Committee on Economic and Monetary Affairs, on public finances in EMU 2007-2008.
Donata Gottardi
Mr President, Commissioner, ladies and gentlemen, exactly one year ago we took the decision to combine the reports on public finances for 2007 and 2008. There were at least two reasons for this: to try to speed up the process and to take account of the signs of change taking place. We did not know the full extent of the changes at the time, but it was already obvious that by analysing two years together we would gain a more comprehensive and accurate assessment. And we were right! The report we will be voting on tomorrow has been constantly updated.
The tight link between public finances and the financial and economic crisis is very clear. Simply consider the resources allocated to bail out banks and big businesses, the support for manufacturing, and bear in mind the calls chiefly from small and medium-sized enterprises, and the protection for citizens from the fallout of the recession. All of these measures have been brought to the attention of the European institutions and individual Member States, however they should not undermine or weaken our outlook and our commitment on behalf of future generations.
The report involves at least two levels: that which is general, stable and valid in all situations, and that which is an emergency response to the current crisis. The principle remains intact, even strengthened, that high-quality, sustainable public finances are indispensable not only for individual countries but also for the solidity of the economy and the European social model. As regards revenue, steps must be taken to broaden the tax base, without however weakening the principle of progressive taxation, and to reduce the tax pressure on work, above all for mid to low-level salaries and pensions. As for expenditure, action must involve an assessment of the context, requirements, the composition of the population, with due consideration for gender policies and demographic change. Rather than introducing indiscriminate reductions, the aim should be to reorganise expenditure, partly by reallocating budget items and modernising public administrations.
A useful way of doing this is through gender budgeting, a method favoured and promoted by the European Parliament for some time, though still far from being the norm. It increases transparency and comparability, is more readily recognised by citizens and thus builds trust and a sense of ownership.
Today's unprecedented instability calls for determined action. If public sector intervention has become central and essential once more, we must not make the same mistakes again - that would be even more unpardonable. Instead, we must steer the crisis towards a new model of development that is genuinely sustainable, both environmentally and socially.
When we talk about European coordination, we should be thinking of having our own counter-cyclical governance, moving together and in the same direction, stepping up the fight against evasion and tax havens and linking national plans together. When we intervene to support businesses, we must assess the impact on competition, the level playing field and the functioning of the internal market, guaranteeing supervision, accountability, restrictions and consequent behaviour. The review of the Stability and Growth Pact permits controlled flexibility, to be used with care and long-term perspective.
The macroeconomic policies and joint investments should be re-launched in strategic, pre-determined sectors using instruments such as the Eurobonds, while keeping a close eye on the sub-national level and regional stability plans. There was a broad consensus on the report within the Committee on Economic and Monetary Affairs, as most political groups shared this vision. I really hope that this is a prelude to a good result at tomorrow's vote.
Androulla Vassiliou
Member of the Commission. - Mr President, the Commission welcomes the Gottardi report and the substance of the report fits well with that of the two earlier Commission reports on public finances in the EMU released in June 2007 and 2008. The Commission also agrees with the three latest amendments tabled by the rapporteur on 7 January.
The European Parliament's report confirms that the revised Stability and Growth Pact (SGP), so far, has been working as it should. In particular, many Member States have made considerable efforts to meet their obligations with regard to the Pact. Since the reform of the SGP, both the corrective and preventive arms have been applied in full accordance with the provisions of the reform pact and any leniency in enforcement has not occurred.
However, the report also emphasises the very negative economic outlook for the EU and the euro area for 2009. Growth has slowed down considerably, to the point of turning into an outright recession this year. The overall economic prospects for 2010 are also discouraging, so the Commission agrees with the European Parliament that supporting demand by making use of discretionary fiscal policy measures is now essential.
Nevertheless, fiscal policy should be maintained on a sustainable course, anchoring expectations of an ordered resolution of the crisis. In this respect the Commission shares Parliament's concerns regarding the long-term sustainability of public finances and continues to put emphasis on its assessment.
A new report on the long-term stability of public finances in the European Union will be issued by the Commission in autumn 2009. The Commission also takes the European Parliament's view that public expenditure has to be reoriented in order to improve the quality of public spending in line with the Lisbon Strategy. Such a policy orientation is indeed part of the integrated policy guidelines adopted by the European Council. Work is ongoing at the Commission for a more systematic assessment of quality of public finance developments including aspects of performance-based budgeting.
President
The debate is closed.
The vote will take place on Tuesday at 12 noon.
Written Statement (Rule 142)
Silvia-Adriana Ţicău  
In the spring of 2006 twelve Member States were going through an excessive deficit procedure. As a result of implementing the recommendations and decisions issued by the Council in the case of countries with excessive deficit, two and a half years down the line the number of Member States going through an excessive deficit procedure is approaching zero. This achievement has been possible thanks to the presence of favourable economic conditions in 2006 and 2007. During the 2008-2009 period we are facing an economic crisis which has already sparked in many Member States economic recession, a rise in unemployment and large numbers of company bankruptcies, especially among SMEs. The European economic recovery plan provides for major public investments for modernising transport and energy infrastructures. Member States are developing programmes aimed at supporting SMEs to allow them to stay in business. In these conditions, Member States in the euro zone, as well as all Member States, will find it difficult to meet the convergence criteria. I believe that measures need to be adopted at European level to enable Member States to face up to the current challenges such as an ageing population, migration, climate change etc. Agriculture, education, health and transport, which are key areas for the EU's economic development and European citizens' quality of life, must benefit from specific public policies.
