Scicluna supports EU budget flexibility for refugee-hit countries

Finance minister Edward Scicluna said he supports a proposal for Eurozone countries to exclude costs of the continent’s refugee crisis from their budget deficit calculations.

“Why not?” the minister responded, when questioned on the proposal that is being pushed by the Austrian government. “It’s a big burden for the countries affected, Malta included but particularly Italy, and we should help in any way we can.

“Malta was physically burdened in a way, so we are interested in making sure that peripheral countries facing the problem are helped in the best way possible.”

Eurozone counties are obliged by EU laws to bring their annual budget close to balance or into structural surplus, excluding one-off items. Austria, one of the countries worst hit by Europe’s refugee crisis, last year reached the required budget balance with a 0.4% deficit.  

However, in May the European Commission forecast that its deficit will double in 2015 and grow to 1.4% in 2016 unless policies change. The budgets of other countries affected by the refugee crisis, including Germany, Italy, Greece and Hungary, are also at risk of being stretched.  

While the EC is likely to consider refugee-spending as an exceptional one-off item, Vienna still intends to avoid the risk and remove the cost of refugee spendings from its budget calculations.

“There are some countries in the Eurozone that ae really affected by the cost of the refugees and I don’t think it would be right if we said we were unable to reach a zero structural deficit due to the costs of the refugee crisis and then still got punished by the Commission,” Austrian finance minister Hans Joerg Schelling told the press before entering a meeting of Eurozone finance ministers. “We only want, as is usual for cases of catastrophe, these costs to be removed.

EU Economic and Monetary Affairs Commissioner Pierre Moscovici said the issue was not on the agenda of the ministers’ meeting, but that the EC was “carrying out a legal, financial and economic analysis” on it.

A Commission official who chose to remain anonymous told Reuters that EU budget rules are flexible enough to accommodate Vienna’s proposal.

“If the Commission receives a specific request from a member state, we will examine whether the flexibility rules under the [fiscal] Stability and Growth Pact could apply,” the official said. “The assessment would need to be made on a case-by-case basis as part of the analysis of national fiscal documents.”

Similarly, Eurogroup chairman Jeroen Dijsselbloem said that the EC should only consider such requests for flexibility on a case-by-case basis “because there are major differences between countries”.