“70% of the disagreements on the new Stability Pact have been resolved, but there remains a critical 30%, which the EU Finance Ministers hope to settle at the Ecofin meeting, next Thursday, December 8,” European officials close to the ongoing negotiations said in statements to “Naftemporiki”.
“The main obstacle is the conflicting visions of Germany and France, which have also created a tension on bilateral negotiations. The final pact should therefore combine Berlin’s intention to have specific numerical targets for deficit and debt with those of Paris, which, like other southern European countries, requires room for investment in order to avoid mistakes, such as those caused by the austerity policies implemented following the financial crisis of 2010-2011,” the same sources underlined to “Naftemporiki”.
“The rule providing for an automatic budget adjustment of 0.5% of annual GDP for countries with an excess deficit, until it is reduced to 3%, appears to have been passed,” they said and added: “The conditions on the limit of spending deviation over the 4-7 years remain to be agreed upon. The main idea is that the annual balance between credits and debits will not exceed a given percentage of GDP. Otherwise, sanctions will be initiated by the Commission.”
The negotiations at the European level to resolve the disputes are led by the first deputy prime minister of Spain, Nadia Calvino, who, together with her team, is working on the preparation of the final text of the agreement. “The goal of the new rules will be to make the necessary fiscal stability compatible with investments that guarantee growth,” European officials emphasized.
According to “Naftemporiki” sources, Calvino is expected to hold an extraordinary meeting with the participation of the 27 EU member states, in the form of a working dinner, next Wednesday, December 7, one day before the Ecofin meeting.
Calvino’s final proposal includes safeguards for determining an average reduction in public debt so that countries with liabilities higher than 60% of GDP will implement it within a certain period of time. Countries with a deficit below 3% are also required to provide an additional margin of safety below this level to react to future crises.
The countries of the South, together with France, are however asking for an amendment to the Pact, which will not provide measures for making fiscal restrictions less strict, but will separate strategic investments from the calculation of fiscal factors.
The EU member states hope to have resolved the matter before the meeting of the European Parliament on December 11, but also the last EU summit for 2023, in Brussels on December 15.
Disagreements in the European Parliament
It is worth noting that in the European Parliament’s Economic Affairs Committee, MEPs from the European People’s Party raised the issue of an annual debt cut of 1.5%, to which their Socialist colleagues counter proposed a minimum range from 0.1% to 0.5%.
The deadline for changing the Stability Pact expires at the end of the year, along with the three-year “escape clause”, which was imposed due to the pandemic.
Unfortunately, the EU often delays taking decisions due to the need to reach consensus. The fact that the debate on the text endorsed by the European Parliament to amend the Treaty of Lisbon was postponed by abolishing unanimous decisions and replacing them with majority choices suggests that Europe has no intention of learning from its past mistakes, which will probably prove to be devastating.