IMF calls for simpler EU budget rules, focus on debt

BRUSSELS

An European Union flag flutters outside the European Commission headquarters ahead of a meeting between Greek Prime Minister Alexis Tsipras and European Commission President Jean-Claude Juncker in Brussels, Belgium, June 3, 2015.

Reuters/Francois Lenoir

The International Monetary Fund called on the European Union on Thursday to simplify its budget rules to limit discretion in their application and focus on bringing down public debt.The head of the IMF's fiscal department Vitor Gaspar told a seminar organized by the European Political Strategy Centre that the European Union's rules were overlapping, difficult to explain and that they diverted attention from debt.
"The complexity allows for considerable discretion in the application of the rules. The track record of compliance is quite weak," Gaspar said.

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"Europe needs a governance framework that
anchors public debt, is less complex, and easier to communicate," he said.
Gaspar said the EU should focus on one objective -- lowering public debt and focus one way to get there -- an expenditure rule, which limits the size of government spending depending on economic growth, combined with a debt break.
He said expenditure rules, which would be adopted at national level in the 28-nation bloc, would mitigate spending pressures, would be growth friendly and help to enforce the goal of limiting debt.
He also said that experience of many countries showed that expenditure rules had a better track record of success in keeping public finances in order than balanced budget rules or debt rules.
The IMF has made a similar call a year ago. The EU and the 19 countries that share the euro in particular, are now looking at ways to streamline their common budget rules in the wake of the sovereign debt crisis that raised the euro zone debt-to-GDP ratio by 30 percentage points to well above 90 percent.
A discussion on the way the euro zone manages its economy is scheduled for EU leaders later this month.
(Reporting By Jan Strupczewski, editing by Robin Emmott)