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Banks

New EU economy team to seek policy middle-ground

BRUSSELS (Reuters) - The new European Commission will spread responsibility for key economic issues over three top officials with different economic views, in what critics say could mean policy deadlock but advocates see as a route to compromise.

Commission President-elect Jean-Claude Juncker appointed French Socialist former finance minister Pierre Moscovici as commissioner for economic and financial affairs, taxation and customs union. He will monitor governments’ fiscal performance and the overall health of the economies of the 28-nation bloc.

France, which has been violating EU fiscal rules six years in a row, has been pushing, along with Italy, for a softer approach to budget consolidation, arguing it would help boost moribund growth in the euro zone.

Some policymakers therefore see the appointment of the Frenchman to the job as a sign that Paris may count on the EU executive’s leniency on its budget consolidation.

“I don’t think the appointment of Pierre Moscovici as commissioner for economic and monetary affairs was a very wise personnel decision,” said Norbert Barthle, budget committee leader for German Chancellor Angela Merkel’s Christian Democrats. “It will be interesting to see how Mr Moscovici deals with France’s excessive deficit,” he said.

“This is where Mr. Moscovici can show that he really represents Europe’s interests,” Barthle said.

France announced on Wednesday it was breaking the latest in a long line of promises to the EU to cut its public deficit, conceding it now would take until 2017 to bring its finances in line with EU rules, rather than 2015 as promised last year.

Moscovici, while saying the EU should not make any exceptions for France, also said that it was “in no one’s interest to put France in a difficult situation by demanding the impossible”, showing his understanding for the views of Paris.

“This is Mr. Juncker’s and European policymakers’ big mistake,” one senior euro zone policymaker said.

“Moscovici won’t have, given his track record in the French government, a moral right to put other countries under pressure to respect the Stability and Growth Pact rules. This is like making a criminal the prison governor,” the official said.

CHECKS AND BALANCES

However, Juncker has designed a new structure of the Commission, under which Moscovici’s job will be part of two wider projects, supervised by two centre-right Commission vice presidents, who may balance the Frenchmen’s views.

Finland’s former prime minister Jyrki Katainen will be the vice president in charge of growth, jobs and investment and will oversee the economic and financial affairs portfolio along with several others relevant to the task.

Another former prime minister, Latvia’s Valdis Dombrovskis who took his country through one of the toughest austerity programs in Europe, will be in charge of further euro zone integration with a special focus on budget discipline and the convergence of economic, fiscal and labor market policies.

He too will oversee the work of several commissioners, including the parts of Moscovici’s responsibilities that belong to the wider euro currency project.

This will create a system of checks and balances, Juncker said. “Vice presidents and commissioners will be mutually dependent on one another,” Juncker said.

“A commissioner will depend on the support of a vice president to bring a new initiative. A vice president will depend on his or her ... commissioners ... to successfully complete the project assigned to him or her,” he said.

An EU official said the system would make decision-making “more streamlined” and ensure commissioners focused their efforts on Juncker’s strategic goals.

It would not mean that vice presidents were empowered to create a “filter or barrier” to a commissioner’s proposals but rather a “cross-fertilization” of ideas, the official said.

In the outgoing EU executive arm most of the tasks that will now be shared by the three officials were either handled by the previous economic and monetary affairs commissioner alone or were not formally assigned at all.

Finance ministers of the 18 countries sharing the euro and the wider team of all 28 EU finance ministers will meet in Milan on Friday and Saturday, to discuss the extent of flexibility built into EU budget rules that Moscovici will have to uphold.

Additional reporting by Michelle Martin in Berlin and Alastair Macdonald in Brussels; Editing by Alison Williams

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