EU ministers stress need for EU fiscal rules
European Union finance ministers said today that changes to EU fiscal rules, currently under review, should support investment in the post-pandemic economy and allow a more realistic path to reduce the huge public debt.
Finance ministers from the 27-country bloc will start discussions at a two-day meeting in the Slovenian town of Brdo on how to change the rules to better adapt them to new economic realities once they are restored from from 2023.
“We will need a debt reduction path that is realistic for all member states. We need to balance fiscal sustainability with the need to support economic recovery,” said European Commission Vice-President Valdis Dombrovskis entering the talks.
The rules set limits on European government borrowing to protect the value of the euro.
They are suspended until the end of 2022 to give member states more leeway to tackle the economic slump caused by the coronavirus pandemic.
Discussions on changing them are expected to last until 2022, but some common themes are already emerging, such as the need to protect public investment, usually the first victim of any spending cuts in times of crisis.
“We have to avoid what happened in the previous crisis when public investments reached zero year after year,” EU Economic Commissioner Paolo Gentiloni said upon arriving at the top.
“This cannot happen in the next few years and this is also the reason why tomorrow we will have a discussion on tax rules related to investments,” he said.
Building consensus on the changes would be “a big effort,” he added.
TO #Eurogroup we will discuss health and the economic outlook. A year ago, we anticipated major challenges for businesses. At this point, we have yet to see these difficulties arise through our coordinated actions. pic.twitter.com/XFJIgjTOQ2
– Paschal Donohoe (@Paschald) September 10, 2021
“Green” investments, aimed at reducing Europe’s net CO2 emissions to zero by 2050, should receive special treatment, some argue, and even be exempt from deficit calculations. ‘EU.
French Finance Minister Bruno le Maire said on entering the talks that it was an idea worth discussing.
Talks over EU fiscal rules are politically sensitive due to a lack of trust between traditionally more budget-frugal northern EU countries and what they see as more debauchery southern nations , a gap exacerbated by the sovereign debt crisis of 2010-2015.
The more frugal fear that others will take advantage of any exemption from deficit calculations and graft onto those that are more stringent on spending, especially since the criteria for what constitutes “green” spending may be difficult to establish. to define.
Currently, the rules state that governments should not run budget deficits above 3% of GDP and should keep debt below 60% of GDP.
If the debt is higher, it should be reduced each year by 1 / 20th of the excess over the 60% limit.
But some countries, like Italy, have a debt of 160% of national production, which makes an annual reduction of 5 percentage points unrealistic, especially if the country has to invest heavily to make its economy “green” and more digitized. .
EU finance ministers from the Netherlands, Finland, Sweden, Slovakia, Czech Republic, Austria, Denmark and Latvia, traditionally representing a more frugal approach to public spending, expressed support careful with changing the rules.
“We are open to a debate on improving economic and fiscal governance, including the Stability and Growth Pact. While sticking to a rules-based fiscal framework, improvements need to be made,” they wrote in a joint letter.