The outcome of February negotiations between Greece and the EU is commonly regarded as the victory of reforms over austerity policy. The Greek Finance Minister Yanis Varoufakis struggled for reducing the conditionality of the financial bailout that Athens have been receiving from the European Union and International Monetary Fund. The new Greek government of the leftist party SYRIZA wanted to take back austerity reforms in order to, for example, “gradually restore salaries and pensions so as to increase consumption and demand”. But it seems that the only thing accepted by the European Commission and eurozone finance ministers is 4-month extension of the bailout in return for presenting a list of reforms that Greece had committed to undertake.

This popular opinion is wrong. Recently, the European Commission gave the green light to not to count public investments co-financed by the European funds as a factor which harms fiscal stability. This mechanism has been demanded by socialist governments of France, Greece and Italy. In the document “Making the best use of the flexibility within the existing rules of the Stability and Growth Pact” the Commission explains that “some investments deemed to be equivalent to major structural reforms may, under certain conditions, justify a temporary deviation from the MTO [medium-term objectives] of the concerned Member State or from the adjustment path towards it”. The key to understand this change is the huge overinterpretation of one of the Stability Pact rules, according to which the real structural reforms, such as the pension system reform, can be assessed as no harm for the financial stability of a member state. Now, even the public investments can become “structural reforms” (but surprisingly only if they are co-financed by the EU). Despite that according to the Commission the “investment clause” is limited to a case when “the deviation from the MTO or the agreed fiscal adjustment path towards it does not lead to an excess over the reference value of 3% of GDP”, it is very likely that this restriction will not be applied to countries which have excessive deficits already. Otherwise, the possibility of writing off public investments from financial stability assessments could not be used in case of such member states as Greece.

Fulfillment of this Greek, French and Italian demand can lead to further destabilization of indebted countries’ fiscal situation, instead of allegedly “promoting economic growth”. Not only the so-called PIGS countries, but also the Central and Eastern European states are exposed to negative consequences of the new mechanism (for example, according to Eurostat, Poland’s general government deficit in 2013 reached the level of 4 percent of GDP; in Slovenia – 14.6 percent; Slovakia, Lithuania, Hungary were close to exceed the 3 percent of GDP general government deficit level). Some investments may be written off from the fiscal stability assessments and therefore become a hidden problem of certain EU economies. It can be even compared to the Greek case of presenting false economic data to the European Commission, but now this procedure will be legal. In practice, the European Union will be able to write off a big part of public investments. It would probably be enough to have 10 percent of EU co-financing per one investment to use the new principle. Last but not least, under the new “flexible” rules politicians can feel free to misuse national and European public funds to attract voters or support unfair links between politics and business.

The new EU rules show that European institutions did not learn the lesson of the debt crisis. Loosening rules of the Stability and Growth Pact, such as introduced in 2005 widely-used rule that justifies deviations from the EU general government deficit targets by “exceptional circumstances”, contributed to the debt crisis of some EU countries. After the crisis, the EU authorities repeatedly stress that its fiscal rules need to be tightened. However, it does not seem it has been improved. Firstly, the so-called six-pack (2011) did not introduced automatic sanctions for member states with excessive deficit. Secondly, the good rules of Fiscal Compact, such as the obligation of keeping structural deficits at the level that is not higher than 0.5 percent of GDP, are not a part of the more restrictive EU law but are an ordinary international agreement. And finally, the European Commission fulfills the demand of SYRIZA to “exclude public investment from the restrictions of the Stability and Growth Pact”.