Denmark set to come off budgetary ‘blacklist’

Date: 30/05/1996

By Tim Jones

DENMARK is preparing to fight its corner amid signs that the German government may oppose its removal from the EU's list of budgetary delinquents at next week's meeting of finance ministers.

The European Commission has recommended that Bonn and Paris should be censured for their inability to bring their budget deficits convincingly below 3&percent; of gross domestic product this year.

But, for the first time since this excessive deficit procedure began in 1994, the Commission is calling for Denmark to receive the same accolade as Ireland and Luxembourg for meeting the Maastricht Treaty's budget targets.

However, in a series of official-level meetings in the run up to next week's Council, French and German representatives questioned the wisdom of taking Denmark off the list when its public debt still accounts for more than 70&percent; of GDP - above the 60&percent; preferred target specified in the treaty.

German officials said this week that they “simply did not know” how Finance Minister Theo Waigel would vote next Monday (3 June), given that he has so far taken the strictest possible line on meeting the debt criteria to convince German domestic opinion that the new currency will be as strong as the deutschemark.

But France indicated at a meeting of the EU's influential monetary committee this week that it would now support Denmark's removal from the 'blacklist'.

The Commission supports Copenhagen's position because it has reduced its budget deficit from nearly 5&percent; of GDP in 1994 to just 1.5&percent; last year, and its public debt from 80&percent; in 1993 to 72&percent; last year.

German officials have, however, argued that the reduction in the debt was partly due to special one-off factors, including movements in the level of the government's account at the central bank.

For its part, Denmark says it could make the debt and deficit figures look even better by withdrawing the account at the central bank or translating assets held in the state's social pension fund and adding them to the government account. By this kind of financial engineering, Copenhagen could cut gross public debt by more than 20&percent;, it claims.

The Commission's recommendations on the 'excessive deficit' blacklist will be subject to a qualified majority vote, along with the latest proposals for the Union's broad economic guidelines.

New Italian Treasury Minister Carlo Azeglio Ciampi, presiding over his first and last finance ministers' meeting as chairman, will concentrate on preparing the agenda for the Florence summit on 21-22 June.

The Commission will again plead its case for the release of up to 2 billion ecu of unused agricultural funds in the EU budget for spending on transport projects.

With steadfast opposition to the idea from British, German, French and Dutch finance ministers, this will have to be referred to the summit. But few expect Commission President Jacques Santer to win hostile EU governments over to his job-creating plan.

“They are not at all keen about the top-up proposal for TENs or for research,” admitted a Commission official. “It is not optimistic.”

A similar fate awaits the proposal from Economics Commissioner Yves-Thibault de Silguy for 'Elise' - a system of loan guarantees for small and medium-sized enterprises using extra resources from the revision of the financial perspectives.

Ministers' curiosity is most likely to be aroused by the performance of the UK's minister, Kenneth Clarke, a known pro-European in a political party riven by disagreement over the current British policy towards the EU. This will be Clarke's first ministerial meeting since London began its policy of non-cooperation in protest over the UK beef export ban.