The Vice President of the EU Commission speaks about the consequences of the pandemic, the planned aid package – and how to get states that are tired of reform to abide by the rules from Brussels.
“The corona virus hit us like an asteroid”
Everything was different this time: Every spring, the EU Commission publishes recommendations on how member countries can use reforms to advance the economy and social systems. The Brussels authorities often urge solid government finances. This year, on the other hand, the advice is to support health systems, companies and citizens in the corona crisis and to accept higher debts.
“The coronavirus hit us like an asteroid and left a crater-like hole in the European economy,” said Commission Vice-President Valdis Dombrovskis. In a video interview with the Süddeutsche Zeitung and a handful of foreign media, the former Latvian prime minister explains when his authority will look more closely at debt levels again – and why he believes the recommendations from Brussels will soon gain more weight.
SZ: Mr. Vice President, the Commission makes recommendations to Member States every year, but governments often ignore them. Are you frustrated?
Valdis Dombrovskis: We publish country-specific recommendations, not country-specific commands. We therefore see this as a dialogue with the Member States. And I would not be so pessimistic about the situation. Our recommendations are increasingly becoming part of the political debate in the countries. In addition, most countries have made at least little or moderate progress in implementation over the past year. Of course, this is far from complete implementation, but it is not progress at all. In the medium term, even the majority of the recommendations are taken up by governments.
The Commission will present a draft aid package on Wednesday. This so-called reconstruction plan is intended to support states in coping with the corona consequences. Much of the money blessing is said to be linked to governments taking your agency’s recommendations more seriously. Will that make a difference?
Indeed, as part of the reconstruction plan, we propose an instrument for reconstruction and resilience. This program is designed to support public investment and structural reform in Member States. Governments must submit reconstruction plans for this, and these plans must take into account the EU’s political priorities and country-specific recommendations. We hope that this will result in more recommendations being implemented.
Grants in return for reforms: will the Commission monitor implementation?
We are not inventing anything new here, but building on rules that the states have agreed on for the budgetary instrument for convergence and competitiveness …
… the new budget pot for the euro zone …
Exactly. The rules here stipulate that the payment of money depends on the progress in structural reforms and investments.
Could the payments from the Corona Aid Package also depend on whether the rule of law works in the recipient country? EU cases against Poland and Hungary are underway for concerns about the rule of law.
Already two years ago, when the Commission presented a draft for the new multiannual financial framework, we suggested that access to EU funding should depend on respect for the rule of law. That still applies. And since we want to pay the funds from the reconstruction plan through the EU budget, the EU budget rules will apply.
How big will the Corona aid package that the Commission will present on Wednesday be?
Together with the reconstruction plan, we will provide an analysis of how high the financial needs are. Our reconstruction plan will reflect the result. At the moment there is no fixed number.
The Commission suspended the Stability Pact for the first time because of the pandemic. When will these rules for sound housekeeping come into force again in the euro countries?
The prerequisite for the suspension is that the EU as a whole is facing a severe economic crisis. If this is no longer the case, we can return to normality in the Stability and Growth Pact. But I can’t give a date here. The uncertainty about economic forecasts is very great at the moment.
After the crisis, the debt mountains of the states will have continued to grow. Isn’t that a problem for the Stability Pact?
In fact, we expect a rapid rise in budget deficits and debt levels and only a gradual decrease in the recovery phase. When the Stability and Growth Pact comes back into force, the starting point of the states will be different than it is today. You will have significantly higher debts and deficits. We have to deal with that.