The European Parliament approved this Tuesday, in its last session in Strasbourg before the elections, in favor of new fiscal rules that limit the deficit and public debt. A review of the already existing stability and growth pact, which will be applied starting next year, and which returns fiscal discipline to the agenda, after four years of open spending during the pandemic and after the invasion of Ukraine.
The institutions already reached an agreement in principle at the beginning of the year after months of difficult negotiation between the countries. With the new rules, debt limits are maintained at a maximum of 60%, and deficit limits at 3%, as required by the treaties, but unlike before, States have a little more room to decide how to comply. with these objectives, in addition to having room to invest in Defense and the green transition.
Each government will have to send the European Commission a credible four-year plan for how they will reduce debt and deficit, although the deadline can be extended to seven years if reforms are adopted to boost growth. Some plans that countries must submit next September at the latest. Even so, the same common cutback objectives will be imposed, and prevent countries from postponing adjustments, as Germany demanded during the negotiation. Thus, when the public debt is greater than 90% they will have to reduce it by at least one percentage point per year; while those that exceed 3% will have to apply a minimum annual cut of 0.5% of GDP.
The European Commission will be in charge of monitoring that countries comply with what they promised and will be able to open files in case of non-compliance. Until now, the possibility of fining was also included, but this step had never been taken due to the harshness of the sanction. Therefore, with the new rules, the fine will be 0.05% of GDP every six months if the deviations are not corrected.
In fact, yesterday the data from the European Statistics Agency (Eurostat) was confirmed in which Spain failed to comply with the deficit with 3.6% in 2023, which could lead the Commission to open a sanctioning file. The European Commission has already announced that it will propose in June the opening of sanctioning proceedings against those countries that closed 2023 with deficit and debt levels higher than the limits set out in the Treaties.
The main popular groups, socialists and liberals, have voted in favor, while the Greens and the Left have voted against, considering that it is a return to austerity. The socialist MEP, Jonás Fernández, considers that the broad consensus is “great news” and rejects that it leads to “austericide.” “They are necessary to guide the fiscal policies of the States,” he has defended.
However, trade union and environmental organizations have criticized the new rules because they believe that they will not leave enough room to invest in the ecological transition or social measures. “These fiscal rules are short-sighted and irresponsible,” the European Trade Union Confederation, the Climate Action Network (CAN), the New Economics Foundation and the Social Platform organization said in a joint statement.
The rules will have final approval from the States next week and will come into force before the end of April.
