The EU kicked off a reform of fiscal rules aimed at setting up an adjustment plan in September. economy

Reforms in fiscal rules are now coming to an end. The European Parliament and the Council of the European Union, led by Belgium, the country that holds the presidency this semester, reached an agreement in principle this Saturday morning. There will be no change now. The limit so that structural public spending does not exceed income will be the compass of the complex fiscal navigation chart that steers the complex …

Reforms in fiscal rules are now coming to an end. The European Parliament and the Council of the European Union, led by Belgium, the country that holds the presidency this semester, reached an agreement in principle this Saturday morning. There will be no change now. The limit so that structural public spending does not exceed income will be the compass of a complex fiscal navigation chart that adheres to the complex balance of ensuring that Member States reduce the accumulated high public debt with the massive investment that requires dual green and A green transition is required. , There is only one step left to formally formalize the agreed norms: the ratification of what was agreed upon by the Plenary Session of both co-legislators.

The step is usually ceremonial, but has a very strict deadline for Parliament as it has to be taken before the European election campaign starts in May. This shows that negotiations have progressed much faster than in other cases since the EU Council position was agreed in December and the Parliament in early January. There have been three in the past week and the last one, which started this past Friday, lasted 16 hours and ended at 2 a.m. on Saturday. There is another element that explains the pace: the old rules were suspended for four years due to the pandemic, in principle they are back this year, but they are agreed/justified by the birth of new ones, More realistic and less rigid, of which they will eventually grow out if there is no birth.

This crowding is seen in one of the elements that the European Parliament itself highlights in its statement celebrating the night’s agreement. “The first national spending, reform and investment plans will be ready in September 2024,” he announced, committing to a very strict calendar, noting that there are European elections in June should a new Parliament be formed. , new senior officials should be elected to the EU later in the year and the new European Commission should become operational in December. Thus, the new rules will definitely come into effect in the 2025 budget.

In the final stages of the legislative process, both the EU Parliament and the Council came up with a tougher stance than that proposed by the European Commission. Both co-legislators respect the main elements of the proposal of the Union Executive. The first is that countries with debt above 60% of gross domestic product (GDP), the maximum limit set in the treaties, undergo a four-year adjustment plan to return to that level. This period can be extended to seven years if the government concerned negotiates to implement Brussels reforms and investments. To define these plans, the debt sustainability index that Brussels will calculate will be crucial and will lead to spending rules that will serve as a central guide to the budgets of countries affected by adjustment plans.

Once custom-made suits were accepted into adjustment plans, co-legislators chose to set common objectives and parameters that would set limits on individualization. However, the EU Council, heavily conditioned by Germany, has raised the bar higher than that of MEPs, so much so that they have put the social democratic group in a bind, various sources familiar with the negotiations say.

Berlin’s demand to set the deficit target at 1.5%, well below the 3% ceiling allowed by the treaties before opening the corrective file, is a problem for the socialists. Although this goal applies only to countries, and with dire circumstances, that have already complied with adjustment plans and are in a state of fiscal stability, it is politically difficult to adopt in the social democratic family. Therefore, compensation has been demanded in the final stages of the negotiations, because there is little doubt on the table that the position of strength belongs to the Council of the EU – that is, to the states – and it is the Germans of the liberal Christian Lindner and his colleagues. A red line to the Finance Ministry.

So in the negotiations, options for a change on the cards have been sought based on the European Parliament’s position allowing greater incentives for investment. Public debt intended for co-financing European programs is repeatedly excluded from expenditure. The second includes the fulfillment of the objectives of the European Pillar of Social Rights among the criteria to be considered when extending adjustment plans from four to seven years, including employment, training or protection against poverty policies.

It is this last part that the Commissioner for Economy and Finance, Paolo Gentiloni, has highlighted, showing his social democratic spirit: “I particularly welcome the fact that the final agreement, among other things, is based on the text agreed in the Council last December. “Makes things better by protecting public investment and strengthening the social dimension of the framework.”

The accent that this former Italian Prime Minister has put forward shows clear nuances in relation to his colleague in the College of Commissioners, Executive Vice-President Valdis Dombrowski, who is responsible for the entire economic sector of the Union’s Executive after attending . In the last part of the conversation. “The agreement on the reform of EU tax rules is a very welcome and long-awaited development (…) The new rules will allow us to deal with today’s new realities and will allow EU Member States to adapt their fiscal policies. “Will provide clarity and predictability for the years to come.”

Spain’s Economy Minister Carlos Bodi has also expressed satisfaction with the agreement. “Investments and reforms will be important levers for growth and sustainability of public finances,” he said, highlighting who, as Secretary-General of the Treasury, was the main negotiator for Spain until he took over the position in the Council of the EU. Consensus was not reached, to become a minister later.

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