The countdown to the entry into force of the new budgetary rules in the European Union has begun, there is an urgent need to rebuild the fiscal buffers exhausted in recent years and the Finance Ministers of the European Union have committed to taking the new instructions into account when Prepare your public accounts for next year.
The new fiscal governance framework should translate into “a slightly contractionary fiscal position” in 2025, says the declaration agreed this Monday by the finance ministers of the euro zone. The weak macroeconomic outlook, the need to reinforce fiscal sustainability and to support the disinflationary process launched by the European Central Bank justify this approach, say the ministers.
The new fiscal measures “will require deficit and debt reduction paths, but they will be gradual paths, which of course take into account the differentiated element for each of the countries and that are compatible with investment and forward growth,” explained the Minister of Economy. , Carlos Body, who as Secretary General of the Treasury negotiated the agreement on the new rules during the Spanish presidency of the Council.
The new rules are expected to take effect in May. The first step for its application will consist of sending to the European Commission, before September 20, the proposals for deficit and debt adjustment paths that each Government undertakes to make to clean up its accounts in four years’ time. The term will be extendable to seven years if they commit to making certain structural reforms.
“It is a tight schedule, a challenge,” but “we will work intensely during the summer with the member states,” assured the European Commissioner for the Economy, Paolo Gentiloni, in statements to the press. Brussels must have the draft budgets in its possession before September 15 and will have one month to evaluate them. The requirements will be stricter for countries that, like Spain, have a public debt greater than 60% of GDP.
“The euro zone faces multiple budgetary demands in parallel with the need to continue rebuilding fiscal buffers,” says the Eurogroup statement, which is committed to carrying out the process while continuing to make “ambitious structural reforms” and “preserve” the investments in the green transition, digitalization and defense. The agreement reflects the shared attempt that the reactivation of the stability pact does not repeat the austericidal errors committed a decade ago during the financial crisis. A large part of the necessary funds must come from the private sector, as stated in the declaration to promote the capital markets union agreed on Monday by the Eurogroup to try to revitalize the project. But “it is very important to find a balance between the importance of consolidation and support for investments,” stressed Gentiloni, who recalled that the Recovery and Resilience Fund will offer financing until 2026 to support investments in key sectors.
Spain was one of the most advanced countries in the deployment of the plan and the collection of the first tranches of aid, but the difficulties in meeting the milestones and objectives to which the fourth aid payment, valued at 10,000 million euros, is conditioned, slowed down the process, weighed down by the failure of the negotiation on the unemployment benefit reform due to differences between the Government coalition and Podemos, since it is one of the measures demanded by Brussels to give the green light to the new payment.
The Ministry of Economy presented the request on December 20 and the Brussels deadline to assess whether Spain meets the requirements expires on March 20, but delays in the collection of funds are not ruled out, either because a one-month extension is agreed. for the Commission to finish its evaluation (it could be the institution that asks for more time), or because it chooses to request a partial payment and it is assumed that the part of funds linked to that reform will be received (the amount has yet to be determined) or forward.
“Both options are possible,” admitted Body, who downplayed the possibility of requesting a partial payment since it would only mean a “temporary deferral” of the collection of aid. “We are in constant conversation with the European Commission itself to see the best option going forward,” but “what is important for us now is to continue making progress in meeting these milestones and objectives,” added Corps, who advanced what they have done. great advances” at a technical level on the unemployment benefit reform.
