ISSN 2330-717X

‘Euro-Plus Pact’ Divides Non-Eurozone Members

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Six non-eurozone countries said they would join a Berlin-inspired project called the “euro-plus pact” that will prompt countries to further coordinate their economic policies and give them access in return to the EU’s permanent bailout facility after 2013.

Bulgaria, Romania, Poland, Latvia, Lithuania and Denmark have decided to join the Berlin-inspired project, according to summit conclusions published on Friday (25 March).

The remaining four countries, including Britain, said they wanted to stay out of the so-called European Stability Mechanism, which will enter into force in June 2013.

“The Pact remains open for other member states to join,” the text adds.

“We adopted the Euro-Plus-Pact, which will provide a new quality of economic coordination,” EU Council President Herman Van Rompuy told reporters on Thursday evening.

Though not overtly stated, the package is believed to be linked to the EU’s permanent rescue mechanism for eurozone nations and those aspiring to adopt the single currency.

EU
EU

However, some diplomats pour cold water on this linkage and simply say the pact makes economic sense for those countries who want to be seen as good pupils or want to adopt the single currency in the future.

The package also recommends rising retirement ages and linking salaries to increasing productivity. It has been left up to individual nations to decide on how and when to achieve these goals.

“The granting of any required financial assistance under the mechanism will be made subject to strict conditionality,” reads a summit statement.

Four countries decide to opt out

However, Hungary, the Czech Republic, Sweden and the United Kingdom have decided to opt out from the pact. Unlike the twelve Central and East European countries that joined the EU in 2004-2007, Sweden, the UK and Denmark are under no legal obligation to join the euro zone.

Polish Prime Minister Donald Tusk said that the final decision on the measures will be made after examining the document. Mikolaj Dowgielewicz, Polish Minister for European Affairs, stressed that all countries will participate in the pact on an equal footing.

“There will be no division into two categories, namely full members and observers,” stressed Dowgielewicz, referring to fears of a two-speed Europe opening up in the EU.

For its part, the Czech Republic will not join the ‘euro-plus pact’, Prime Minister Petr Nečas told the country’s parliament in Prague. According to him, such a move would trigger fiscal harmonisation, which he said was not in the interest of the Czech Republic.

Nečas also criticised the fact that the pact had been negotiated by the eurozone members without any consultation with non-members.

However, Nečas did not rule out his country joining on at a later stage.

Bulgaria first to join

A few weeks ago, Bulgaria became the first country to announce plans to enshrine a debt-alert mechanism in its constitution. Just before leaving for Brussels on Thursday, Prime Minister Boyko Borissov told parliament in Sofia that Bulgaria would back the “euro-plus pact”.

“If we don’t back the ‘euro-plus pact’, there is no use of applying to become a eurozone member,” Borissov was quoted as saying by Dnevnik, EurActiv’s partner publication in Bulgaria. However, all the twelve countries of the 2004-2007 EU enlargement wave have the obligation to adopt the euro.

The move to join the ‘euro-plus pact’ is an act of applying to the euro zone, Borissov further said, assuring the parliamentarians that all pros and cons had been carefully evaluated.

With its flat 10% income and corporation tax, Bulgaria remains the country with the lowest tax burden in the whole of the EU. Djankov said that the country would keep that up, in spite of a call by Merkel and Sarkozy to “create a common assessment basis” for corporation tax.

France has a corporation tax rate of 33.33%, while Germany has an aggregated corporation tax of 15.855% (federal) plus 14.35-17.5% (local).

The first draft of the pact asked countries to harmonise their corporate taxes but this drew too much criticism from member states, in particular Ireland.

Now countries are expected to develop a common corporate tax base (CCCTB) as a “revenue neutral way forward to ensure consistency among national tax systems,” according to the draft conclusions from the summit.

Original article

EurActiv

EurActiv

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