European Union countries that get more time to meet the bloc’s budget targets should have to show progress in areas like pension and labor-market policy to keep the leeway, Dutch Finance Minister Jeroen Dijsselbloem said.
Dijsselbloem, who leads the group of euro-area finance ministers, said countries should have to make “big reforms” if they need more time to bring their budget deficit below 3 percent of gross domestic product, as required by EU rules. Countries that don’t follow through should lose the extra time and be forced to cut budgets more quickly, he said in an interview with the de Volkskrant newspaper published today.
“I want to attach new conditions to the flexibility in the pact, namely that in exchange for extra time, serious reforms take place like more flexibility in right of dismissal or a higher pension age,” Dijsselbloem said. “If halfway it appears a country does not fulfill its obligations, the clemency recedes and the country has to do additional austerity.”
The Netherlands is one of a handful of countries, including France, Spain and Italy, that in June won extra time to meet budget goals. Countries with the strongest fiscal positions, such as AAA rated Germany, have pushed for central oversight of national budgets as a condition of creating cross-border crisis backstops like the European Stability Mechanism.
Dijsselbloem said he’ll seek support for his proposal from other finance ministers, many of whom now say that the current policy has sufficient flexibility.