The finance ministers of the European Union have supported this Tuesday the change in fiscal rules that has been proposed for months in Brussels. Specifically, a relaxation of the rules is expected that will allow governments to set their own adjustment paths on the condition of investments and reforms.
The position of the Twenty-seven has been able to establish just in time before the summit of Heads of State and Government next week and for the European Commission to make its formal proposal on the future of the Stability Pact, after months of debates, and to be able to finalize the changes before the end of 2023, during the rotating presidency of Spain of the Council of the EU.
The countries maintain that it will not be possible to exceed a 3% deficit and the debt will not exceed 60%, something enshrined in the Treaties. In addition, they support the possibility —as the Commission announced last November— of countries designing their fiscal paths according to their particular situation.
However, as requested by countries such as Germany or the Netherlands, countries are urged to undertake a “fiscal effort” to reduce debt. In other words, the fact that countries are given the freedom to plan their debt reduction does not mean that there is ample room. They have also approved the inclusion of “safeguards” so that the debt is reduced at a “sufficient” rate and that the sanctions are “more effective” and “automatic” (with the current system no country has ever been penalized, although Spain and Portugal were at the gates in 2016), also with smaller amounts, therefore, easier to apply.
Despite everything, the ministers did materialize the radical change compared to ten years ago, when excessive fiscal dogmatism severely squeezed many economies —especially in southern Europe—, for example, with which in exchange for reforms and investments [as in Defense or in the digital transition] the fiscal adjustment period can be extended.
The text has been approved unanimously, but to the surprise of its partners, Germany has threatened to veto the conclusions – which had been approved at a technical level – due to its discontent with the 2024 budget guidelines presented by the European Commission last week. In particular, the fact that Brussels will not expedite countries that exceed a 3% deficit until next year, and not this 2023 as Berlin wants.
Finally, according to what the German Finance Minister himself, Christian Lindner, has said, Germany has managed to get a commitment that the Commission will continue to consult with the countries before presenting its legal proposal on the Stability Pact, scheduled for early April. “A deeper technical discussion is needed on the issues that are still pending,” explained the Liberal headline.
The German movement has not gone down well at all with the European partners and has raised more than one eyebrow, because Berlin “is getting used” to jeopardizing agreements, European sources have ironized, in a clear allusion to another agreement that is pending German approval, the end of the sale of combustion cars by 2035 and that Germany continues to veto. The Liberal Party – of which Lindner is a part – has recently fallen in the polls and its veto is perceived as an attempt to show the strong hand of his party on two very popular issues for domestic consumption in the country, support for the automobile industry and fiscal discipline.
For the Commissioner for the Economy, Paolo Gentilioni, he has assured that he is “totally aware” that aspects must continue to be discussed before presenting the proposal, but he has insisted that the new rules cannot be the same as before. The reality after the pandemic and the war in Ukraine is not the same, and the economy cannot live with its back to it.
