EU draft document urges more focus on growth, jobs

European leaders will consider calls for an interpretation of EU budget rules that gives more emphasis to economic growth, according to the draft of a document being circulated before a summit in Brussels this week.

The document, which European Council president Herman Van Rompuy is drawing up in consultation with Italy, the next country to hold the rotating EU presidency, marks an effort to reset the EU agenda away from the budget cuts and tax squeezes that characterised the initial reaction to the euro zone debt crisis.

With much of Europe still struggling to return to sustainable growth and with unemployment rates at record levels in many areas, pressure for a change of course and an easing in austerity was underlined by a surge in support for anti-EU parties in last month’s European Parliament election.

The draft, which could still change before the summit on Thursday and Friday, calls for steps to create growth and jobs and to support deeper reform by individual member states. However it does not call for a change to the rules set in the EU Stability and Growth pact or the region’s ‘fiscal compact’ and contains few specifics.

“Given the persistently high levels of public debt, growth-friendly and differentiated fiscal consolidation must be continued,” the document says.

“Recovery remains fragile and uneven and efforts must continue and be enhanced in order to strengthen Europe’s capacity to grow and create jobs,” it says.

The proposals form part of a wider deal under which centre-left leaders agreed to support former Luxembourg prime minister Jean-Claude Juncker as the next president of the European Commission in exchange for policy agreements on growth and jobs.

Germany, long opposed to any relaxation of the EU rules which limit budget deficits to 3 per cent of gross domestic product and bind member states to a steady reduction in the public debt, has not openly opposed calls for more flexibility but says the rules must be respected.

“The Stability and Growth pact includes the possibility of a flexible application in individual cases,” a German government spokesman told reporters in Berlin.

Italian prime minister Matteo Renzi, strengthened by a triumphant result in last month’s European election, has been one of the main promoters of greater budget flexibility in the EU, intended to complement his pledges for structural reforms at home.

His undersecretary in charge of European affairs, Sandro Gozi, said there was broad agreement on Italy’s priorities.

“We think there is an excellent basis for the next six months because I think there is very wide support for our priorities and our methods,” he told reporters.

The details of what calls for flexibility might mean in practice have remained sketchy but Italy has in the past sought to have spending on infrastructure investment and research excluded from deficit calculations. It has also sought to win more time to bring its structural budget deficit, adjusted for the effects of the business cycle, into balance.

The discussion has played into horsetrading over the composition of the next European Commission, with Juncker the target of fierce opposition from Britain, which considers him too closely associated with federalist policies that would concentrate power in Brussels.

Mr Renzi initially expressed some scepticism over Juncker but at a meeting at the weekend with other centre-left leaders he agreed to support his candidacy in exchange for a new approach to budget policy.

Mr Gozi also said Italy would secure a “heavyweight” representative on the new Commission which will be appointed later this year.

Mr Renzi, a longstanding critic of rigid EU deficit rules who has called for renewal in both Italy and Europe, was a rare exception among government leaders in the EU poll, winning 40.8 per cent of the Italian vote, the best result for any Italian leader since the 1950s.

The draft summit document also calls on the bloc as a whole to assume more responsibility for the southern Mediterranean migrant crisis faced mainly by Italy, Malta, Greece and Spain and to step up measures to ensure energy security. (Reuters)