2023-12-21 03:45:15
The Twenty-seven reach an agreement, this Wednesday, to reform the fiscal rules of the European Union that limits the debt and deficit of the member states. After four years frozen due to pandemicthese rules are once again in force, and mark a milestone in the economic management of the bloc.
The signing of the pact took place after almost two hours of intense discussions in a videoconference of the Ministers of Economy and Finance of the European Union. months of Debates and negotiations have come to an end, paving the way for a unanimous 27 agreement, after Italy withdrew its objections. This provides Italy with greater fiscal space to drive the green transition of its industry, thus marking a significant step forward.
European sources confirm that the new rules have the potential to offer “certainty to financial markets and reinforce confidence in European economies“. At vFirst President and Minister of Economy, Nadia Calviñostated in a press conference that The agreement is “good news for Europe” and a “golden brooch” for the Spanish Presidency of the Council.
Calviño has emphasized that the reformed rules are more “credible” and “realistic”, adjusting to the post-pandemic economic reality that has increased the deficit and debt in all EU countries. These standards incorporate lessons learned during the financial crisis and are adapted to the specific situation of each country.
“The rules incorporate safety nets to ensure that the system is balanced in terms of fiscal discipline and also to boost economic growth,” explained the vice president, stressing that they represent “the best possible rules.”
“Time of important economic and geopolitical challenges”
The Executive Vice-President of the European Commission, Valdis Dombrovskis, has stressed that the reformed rules will preserve the sustainability of public finances, allowing room for investment and stimulating necessary reforms. “In a time of important economic and geopolitical challengesthere is no time to lose,” said Dombrovskis, referring to the negotiations with the European Parliament that will take place at the beginning of next year, after the agreement of the Twenty-seven.
The pact addresses crucial issues, such as the speed of countries’ convergence with respect to 1.5% deficit safeguardwhich will be established in general terms at 0.4% and could be made more flexible to 0.25% with reforms and investments accredited by governments.
Another key aspect was the maximum allowable deviation from annual net spending targets, which will be set at 0.3% annually and 0.6% in the aggregate total during the adjustment plan.
Additionally, the proposal includes specific measures for countries with particular debt levels. Establishes an annual reduction of 1% of GDP for those with debt greater than 90%, such as Spainand a 0.5% annual adjustment for those with debt between 60% and 90%.
3% Excessive Deficit Procedure
He fiscal cushion It is introduced for countries with a low deficit but a debt greater than 90%, asking them to reduce the deficit to have a 1.5% margin below the 3% limit. For those with debt below 90% of GDP, a smaller deficit reduction is allowed, up to a 2% cushion.
Countries that exceed the 3% deficit reference value will face an excessive deficit proceduremarking a “coherent” path with a minimum structural adjustment of 0.5% of GDP.
The day before the videoconference, The consensus between France and Germany has paved the way for Italy to join the agreement.or, thus consolidating the support of the two largest economies in the EU.
The reactions of the Member States are positive. Sigrid Kaag, Minister of Finance of the Netherlands, highlights that the standards provide a “solid basis for national budgets”, underlining the importance of complying with them more effectively in the future. Mihály Varga, Hungarian Minister of Finance, appreciates that the new governance framework reinforces the role of the Member States vis-à-vis the Commission and recognizes the Budapest proposal of take into account defense spending when evaluating deficit levels.
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