BRUSSELS - In the negotiations on the new EU Stability Pact, the hypothesis on the timing of the minimum debt reduction envisaged for countries exceeding 60% of GDP is becoming less stringent. This is what emerges from the latest version of the working document prepared by the Spanish presidency of the EU during the Economic and Financial Affairs Council held in Brussels. The turnaround was achieved on the basis of a Danish proposal, which provides for the reduction of debt in the 4 years after the adjustment period (4 years extendable to 7 which become 8 extendable to 11). The Germans demanded that the decline take place as early as the last year, while the initial Spanish draft reached 14 years (17 in the case of extension).
Spanish minister Nadia Calviño, who represents the country holding the rotating presidency of the EU Council, has ruled out that there are countries that in the current negotiations on the Stability Pact would prefer a return to the old rules despite the hypotheses of further safeguards on the deficit. "I have not heard these remarks from any state in the very intensive exchanges we have had in recent weeks," he said at the press conference at the end of Ecofin. "What we have heard today is a very strong commitment to adopt the new rules and an appeal from all institutions" to find an agreement.
In the reform of the Stability Pact, Italy is not afraid of this possibility. Sources in the Ministry confirm that "Rome is not afraid" of the idea of safeguards for the average annual decline in debt, as long as they are on sustainable and credible values.
On the reform of the Stability Pact, "the time has come to come up with a legislative proposal: the Spanish presidency has presented a compromise text that includes the contributions of all the member countries of recent months so that we can lay the foundations of a new framework that can give stability and confidence to the markets and to the European population", the Spanish minister added. "The presidency will share and present a draft legal text in the coming days so that this general approach can be concluded at the Ecofin meeting in December" and in order to "achieve this objective, an extraordinary Ecofin will probably be organised in November".
An agreement on the revision of European economic governance "in our view is essential to be able to send a message of stability to the markets", said European Central Bank Vice-President Luis De Guindos speaking at the public session of Ecofin. "We welcome the progress made in reaching a compromise on this important file," he said. The ECB's number two believes it is necessary to get to the end" of the work and "find a compromise" while remaining focused "on the main objectives of the reform" with "a credible framework that offers fiscal sustainability with credible fiscal rules and that allows for further reforms and investments".
German Foreign Minister Christian Lindner said he was "more optimistic that an agreement can be reached this year" on the reform. "The character of the proposals we're discussing has changed," Lindner said before the meeting began. "It is now generally recognised that we need a safety line to reduce the national debt and that on annual budget deficits you need to have some specific considerations: these were two important concerns for us," he stressed in front of reporters.
Compared to the document of the Spanish presidency of the EU on the 'landing zone', the German minister stressed, "there can be substantial progress with regard to the different elements". "There's still a lot of work to be done because, even though the effects of the tools have been recognized, now it's obviously a question of calibrating them, now it's a question of how the tools are actually supported with numbers and requirements, it's a matter of level of ambition." "My optimism has grown that we will be able to reach a political agreement this year: whether we will be able to transfer a legal text is of course still an open question," he stressed.
In the working text of the Spanish presidency of the EU, with which Madrid aims to create a 'landing zone' for the agreement, a new point on investments is indicated as a "transitional solution", with a partial reformulation that adds precisely the national co-financing of EU funds. "The commitments of the Recovery and Resilience Plans will be considered sufficient to meet the conditions of the extension in the first round of medium-term fiscal-structural plans," reads a working document prepared by the presidency of the EU Council. "Projects related to loans from the Recovery and Resilience Fund in 2025 and 2026, as well as national co-financing of EU funds, will be considered whenever a member state requests an exception to the safeguard of non-backloading, provided that this does not jeopardise fiscal sustainability in the medium term." The 'non-backloading' principle of the new Pact should lead to linear adjustments to the accounts and to prevent any postponements from jeopardising the consolidation targets. The
The text does not break the deadlock, but we continue to work. But the focus on investments is now increasing, with this sort of exception of investments linked to national co-financing of EU funds.
In the negotiations between France and Germany on the reform of the Stability Pact "we are working", the "mood is excellent" and "we are heading in the right direction", said Bruno Le Maire in his speech to journalists on the sidelines of the meeting. "The mood is very positive and constructive, there is no deadline", in the current negotiations: "the deadline for finding an agreement is the end of 2023". The French thus declined the request to comment on the hypotheses on the table on the values of debt and deficit reduction.
"We are working closely with Germany to try to find a Franco-German agreement: Minister Lindner was in Paris earlier in the week, we had in-depth discussions, our technical teams continue to work closely together and in the coming days I will go to Berlin to try to progress on a Franco-German agreement on these new rules of the Stability and Growth Pact." The aim "must be to find the right balance between financial stability, which is essential for the 27 member states, and investments that are equally essential for Europe to remain a major economic power in the <>st century, with investments in the decarbonisation of our economy and investments in defence at a time when war has unfortunately returned to European soil", explained.
European Commissioner for Economy Paolo Gentiloni appealed to the EU's difficult economic prospects. "Reaching an agreement on fiscal rules is essential for what is called a soft landing, but also to give certainty to financial markets and because in the perspective of the European economy we need stability on public debt and the possibility to support growth and investment," he told reporters.