Luxembourg's Juncker Defends Fiscal Compact

by Ulrika Lomas, Tax-News.com, Brussels

03 February 2012

Luxembourg’s Prime Minister and President of the Eurogroup Jean-Claude Juncker has recently underlined his support for and confidence in the new so-called “fiscal compact”, a treaty on stability and convergence in the Economic and Monetary Union endorsed by 25 of the 27 European Union (EU) member states during a summit meeting in Brussels.

Juncker expressed his confidence that the planned fiscal compact would succeed, despite the obvious failings of its predecessor the stability pact, arguing that any member state electing to sign up to the agreement is fully committed to a stable union and to a lasting solution. Here Juncker stressed that any member that has contractually committed to introducing a debt brake rule in its national constitution and to striving towards a lasting balanced state budget, would not be able to renege on its commitments.

Rejecting claims that the eurozone and indeed Europe will collapse in the event that the fiscal compact is not ratified by all 25 member states, Juncker pointed out that the treaty will enter into force as soon as it has been ratified by twelve member states, and stated his conviction that once the ratification process begins, all those member states that have now signed up to the fiscal pact will actually implement the treaty provisions

Discussing the issue of Greece, Juncker acknowledged that the Greek government’s consolidation programme has indeed blown off course, and underscored the need for all member states to apply increased pressure on Athens to get the country to implement the agreed reform measures and back on track. Juncker nevertheless ruled out the idea of transferring partial budgetary control to the EU, as mooted by Germany recently.

Concluding his remarks, the Luxembourg Prime Minister alluded to the primary goals of the latest European Council summit, emphasizing that growth and employment are equally as important as budgetary consolidation. The idea that Europe can exit the crisis merely via budgetary consolidation alone is fundamentally flawed, he concluded.

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