EU to investigate Germany’s policies

The EU is to investigate Germany’s economic policies, including its massive export surplus, with Berlin warned that it had better co-operate or risk undermining the credibility of the economic oversight it fought so hard to impose.

A European Parliament report shows that over the past two years France and Germany — the two big eurozone countries — implemented only 3% and 9% respectively of Commission recommendations in 2011 and 2012, despite them being backed by EU finance ministers.

Commission president Jose Manuel Barroso outlining the top five priorities to guide member states’ budgets this year said the EU was reaching a turning point and was entering a recovery phrase.

But a report on unemployment, poverty and inequality showed that these had been growing during the crisis in troubled member states and that the gap between the rich core and the poorer periphery states had been widening.

The gap between rich and poor has widened even more in the most troubled countries, where household incomes declined by 10% over two years. Countries needed to address these issues and create jobs quickly, said Employment Commissioner Laszlo Andor.

Mr Barroso was adamant that the policies were working with nobody speaking now of the demise of the euro and Ireland and Spain, about to conclude their bailout programmes, were proof.

National budget deficits had halved since their peak — although debt had risen — and there was a need to find alternative sources of credit to help companies create jobs.

But the spotlight was on Germany and France. These large eurozone members had a responsibility. They would investigate the current account surplus, which is second only to that of China.

Hints from Economic Commissioner Olli Rehn about this step have drawn sharp criticism from the German media so far, accusing Brussels of wanting to reduce Germany’s competitiveness and its exports.

Such claims were refuted by Mr Barroso and by Commissioner Rehn who said the debate was “sometimes simplistic and not very constructive”.

Germany had been the biggest winner from the common market and it was a question of whether the economic powerhouse of Europe could do more to help others by, for instance, opening up the service sector, which he said was heavily protected.