ECB urges fines on eurozone members for failure to comply with reform rules
In a report published on Monday, the bank expressed concerns over the sluggish pace of economic reform in the eurozone, saying it could hurt the bloc’s longer-term growth and stability.
According to the ECB, governments should be fined up to 0.1 percent of gross domestic product if they repeatedly fail to address economic flaws identified by EU authorities.
The measure is part of a new risk-monitoring system known as the macroeconomic imbalances procedure which was designed to prevent worrisome economic developments such as high current account deficits, unsustainable debt levels, and house-price bubbles.
“There seems to be a strong case for applying the corrective arm of this procedure for all countries with excessive imbalances,” said the ECB.
The EU’s executive arm, the European Commission said the number of countries in which EU authorities have identified “excessive imbalances” is at an all-time high. France, Croatia, Italy, Cyprus, Portugal, and Bulgaria, are among those countries.
In February the commission said that for more than 90 percent of its 2016 recommendations, there had been only “some,” “limited” or “no” progress on implementation. It noted that a very small number of recommendations had been “substantially” or “fully” implemented.
The ECB has explained the failure “is all the more concerning given the remaining rigidities and vulnerabilities in euro area countries.”
According to the central bank, the use of financial sanctions against offending governments “offers a well-defined process ensuring greater traction on reform implementation for the most vulnerable member states.”
Last year, the European Commission warned eight countries, including Italy, that their budgets might fail to comply with EU budget rules.
According to euro regulations, all the member states have to keep their budget deficits at or below three percent of GDP. Spain and Portugal have managed to avoid the fines despite failing to comply.