EU hits and myths

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The lack of respect for EU deficit ceilings is increasingly seen as a crime in the eurozone. But does the punishment of sanctions work? And when speaking of crime and punishment, how can we hope to overlook our continental relations with Russia? The fact-checking site Pagella Politica provides answers to these questions. 


Is it true that EU budget legislation is often ignored?

TRUE – The original sin was committed back in 2003, the year that France and Germany flagrantly violated the European Community’s budget deficit laws. Today, Europe’s ‘fiscal hawks’, led by the Nordic nations, are asking just how effective this legislation really is. Currently, 11 countries have an excessive deficit procedure opened against them; five of them since 2009. In the past, the European Commission declared excessive deficit procedures against 15 other nations. This leaves just two states (Estonia and Sweden) with an immaculate fiscal record. Considering that more than half of the 15 nations that were EU members in 2002 sustained deficit levels of over 3% of their GDP for over half of the subsequent decade, we can’t say that the disciplinary measures have been truly ironclad.

Is it true that the European Commission cannot reject a national budget?

FALSE – The legislation introduced to tighten fiscal discipline in the eurozone includes the so-called two-pack regulations, which oblige eurozone nations to present their budgets to the Commission and the Eurogroup before submitting them to their national parliaments. Confronted by the French National Assembly’s opposition, Prime Minister Manuel Valls fended off accusations of having accepted a loss of sovereignty to Brussels, insisting that the Commission has no power to reject a national budget. This is partially true. Even though sanctions do not automatically go into effect if a country is found to be in ‘serious breach’ of the Stability and Growth Pact, both France and Italy chose to accommodate the Commission’s demands, making further adjustments to trim their structural deficits. Therefore, states’ sovereignty over their national budgets seems to be eroding, despite the fact that budgets are controlled by national legislative and executive organs.

Is it true that Russia’s sanctions against the EU and the EU’s sanctions against Russia have cost billions of euros?

TRUE – In March 2014, the European Union imposed sanctions against Russia in response to Moscow’s military actions in Ukraine. Members of Eurosceptic parties railed against the sanctions, exaggerating the costs. It is true, however, that these costs are not insignificant. Indeed, the sanctions do encompass a block on exports of technology that can be used for both military and civilian purposes. This includes computers and electronic and telecommunications equipment and services; EU exports to Russia in this sector amounted to around €7 billion in 2013. The European Union has further imposed a block on arms sales to Russia (€0.5bn in 2013) and frozen Russian state-controlled banks out of its capital markets. According to the independent think tank Open Europe, the sanctions will cost London approximately €90-130 million. Meanwhile, Russia’s counter-sanctions, which target imports of certain food and farming products from all the EU countries, will cost Europe around €5 billion each year that they are enforced, according to the Centre for European Policy Studies (CEPS). The overall costs could therefore reach €10-12 billion per year.

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