The countries of the European Union (EU) reached an agreement this Saturday for a new fiscal pact that will come into force this year, after being suspended for three years due to the Coronavirus pandemic, which will allow the debt and deficit to be reduced, and, at At the same time, maintain investments in key areas such as defense and green transition.
The agreement, which regulates the deficit and debt limits of the bloc’s members, comes after two years of negotiations in which an attempt was made to balance the positions of countries that prefer austerity, such as Germany, and those that defend greater flexibility, like France and Italy.
“I welcome the political agreement on our ambitious EU economic governance reform for a competitive and fair European economy,” said the President of the European Commission, Ursula von der Leyen, in a message published on the social network X.
The new rules – he indicated – “will allow EU countries to invest in their goals and at the same time consolidate their public finances.”
Two positions and difficult negotiations
The 27 countries of the bloc had already reached a basic understanding in December that later gave way to difficult negotiations in the European Parliament.
The discussions were extended this Friday for 16 hours until early morning on Saturday, under pressure from the need for the text to be approved before the European Parliament elections next Juneas indicated by the AFP and Bloomberg agencies.
The new fiscal rules “will contribute to the balance and viability of public finances, structural reforms, investment promotion, growth and job creation in the EU,” Von der Leyen said.
The rules had been suspended during the pandemic to allow countries to have more maneuverability in expenses, but once the health emergency ended, disagreements began to exist regarding its return.
Although some countries called for a return to austerity, the war in Ukraine and the need for investments for the climate transition caused the discussion to be modified.
A group led by France defends maintaining flexibility to allow investments and finance new infrastructure or the supply of weapons to Ukraine.
The agreement
The tax agreement known as Stability and Growth Pact It will limit countries’ debt to 60% of their Gross Domestic Products (GDP) and the public deficit to 3%, the same as before the pandemic.
However, the proposal will allow the rules to be adapted to the situation of each countryand those who exceed these percentages will be given a period of four years to comply with them in the form of adjustment that each State prefers.
For those countries that undertake reforms and require greater investments, this adjustment period may even be extended to seven years.
Countries with excessive debt – more than 90% of GDP – must reduce it by 1% annuallywhile those with debt between 60% and 90% must reduce it by 0.5% annually.
That is, the countries are not obliged to reduce the debt to less than 60% in the four – or seven – years of the pact, but they must demonstrate that it is on a downward trajectory.
How the legislative process continues
Following the consensus reached in Brussels between the representatives of the European Commission and the European Parliament, the agreement It must now be approved by each of the national governments and by the EU Assembly for it to become law.
Once approved, each Member State must present its national medium-term plans before September 20, which will be reviewable in the event that circumstances arise that prevent their implementation.
“The new rules will significantly improve the existing framework and ensure effective and applicable rules for all EU countries,” Belgian Finance Minister Vincent Van Peteghem said in a statement.
In that same sense, the Belgian minister highlighted that will allow “to safeguard balanced and sustainable public financesreinforcing the focus on structural reforms, and encouraging investment, growth and job creation in the EU.”
In the case of countries with high debt, but low deficit, they will be asked to reduce the fiscal red below the 3% floor to have a greater “cushion” and respond to possible economic shocks.
That is, the countries are not obliged to reduce the debt to less than 60% in the four – or seven – years of the pact, but they must demonstrate that it is on a downward trajectory.
“A new framework for economic governance was necessary. We take our responsibility by ensuring that the new fiscal rules are reasonable and credible, also leaving room for necessary investments,” said Esther De Lange, a Dutch member of the European People’s Party in parliament.
2024-02-10 18:39:36