Fiscal rules are a key element of EU economic policy that will determine how much governments can invest and how much they should focus on reducing debt burdens. The old rules, which were suspended to allow room for maneuver in spending during the pandemic and energy crisis, are no longer considered fit for purpose. The EU is expected to reach an agreement on new tax rules before the end of the year, which will come into force from January 2024.
Finance ministers from the European Union’s two biggest economies said they were confident they would reach an agreement on new fiscal rules with their bloc counterparts in a virtual meeting on Wednesday.
Bruno Le Maire of France and Christian Lindner of Germany said in a joint interview in Paris on Tuesday that they hope to reach a bilateral agreement in the coming hours that will serve to convince other EU countries.
“We have found the right balance between the absolute need to return to sound public finances, to reduce the level of public debt and to have sustainable public finances across Europe,” said Le Maire.
There is also a need for more investment in climate transition and defense, he added.
Speaking alongside him, Lindner said: “We allow investment, we maintain fiscal space for structural reforms, but compared to the old rules, the new rules will reliably lead to lower debt levels and deficits.”
Le Maire said they still need to resolve “some small technical difficulties on the preventive side”, which aims to ensure that member states pursue sound budgetary policies in the medium term.
An element still open for discussion is the speed at which countries have to converge on a new budgetary reserve below the deficit threshold of 3% of gross domestic product, which Spain proposed to set at 1.5%, according to a diplomat from Spain. HUH. The other issue still to be agreed is the permitted deviation from the maximum expenditure limit, which will become the key indicator for keeping budgets under control.