Slovakia says Brussels should discipline states that break budget rules

France and Italy should face disciplinary action if they do not act to bring budget deficits into line with EU rules, Slovak Finance Minister Peter Kazimir told Reuters, saying the bloc needs to be a level playing field. Slovakia has been one of the euro zone’s better budget performers. However, it remains vulnerable to the economic weakness that has dogged the currency bloc ever since the global financial crisis awakened investors to the risky scale of many states’ debts.

The European Commission has delayed judgement until early March on the French and Italian plans to come into line with borrowing limits. If still found wanting, France could be fined and Italy put under a disciplinary procedure.

Kazimir said the Commission must be ready to enforce rules but expressed confidence that France, which is way off its budget target for 2014, would be able to present a plan to get back within the rules. “The rules should apply for everyone. A level playing field is the key thing,” he said in an interview. “When the Commission assesses that a country is not keeping the rules, it has to act in line with the rules.”

Under rules set out in the European Union’s Stability and Growth Pact, countries must cut their structural deficits, stripping out the effect of the business cycle and one-off items, by 0.5 percent of GDP every year until budgets are balanced or in surplus. Both Italy and France are failing to meet this obligation. While Slovakia has brought its deficit below the EU-mandated limit of 3 percent of economic output, it also wants to keep its total debt load below levels that would trigger automatic budget restrictions set in national law.

With the euro zone also desperate for economic growth that would help reduce the debt ratio, attention has turned to a 300 billion euro ($375 billion) investment plan by new Commission President Jean Claude Juncker. “It has to be a kick-start for the economy,” Kazimir said. “It can solve some things, but not everything. You have to go on with fiscal consolidation and structural reforms.” He said there was still a lack of detail but that Slovakia would be willing to take an equity stake in the plan – one idea being floated – once it was clear how it would be treated under EU budget rules.

He said the investment plan could be used for joint central European projects involving the Czech Republic, Slovakia, Poland and Hungary, including in energy. Euro zone heavyweight Germany has also been under pressure to invest more but is reluctant to break from its plan to balance its budget for the first time in 50 years. Kazimir said that while more investment would help, it must be voluntary from Germany’s side.

The plans for investment are alongside efforts by the European Central Bank, whose President Mario Draghi is expected to tell EU leaders at a summit next week that they need to reform straggling economies or risk blunting an ambitious monetary offensive. Markets are increasingly expecting the ECB to begin buying sovereign debt early next year to revive growth and inflation.

Kazimir has already backed the idea of some economists that the ECB could buy bonds issued by the European Investment Bank, which will manage funds for the Juncker plan. He said on Friday it could help widen their capacity. “If QE (started) then for example, EIB bonds could be bought and that would maybe be more interesting than buying sovereign debt.” Germany in particular opposes any idea of the ECB buying government debt as encouraging state profligacy.