2024-02-10 09:13:40
After weeks of negotiations, six trilogues, and a last 16 hour marathon los representatives of the European Parliament and the Council have managed to close this morning, at the edge of two in the morning, a provisional political agreement about another of the key files of the legislature: the new architecture of the EU tax rules that will begin to be applied in 2025, which inaugurates a new stage of more flexibility for governments, but also tighter budgets y strict deficit and debt reduction requirements, just as Germany demanded.
The reform, which will now have to be formally approved in the coming weeks by the Council and the European Parliament, keeps the two pillars of the Stability and Growth Pact: the maximum ceilings of 3% for the public deficit with respect to GDP and 60% for the debt. The new system, according to the governments, will allow the ratios to be reduced in a “gradual, realistic, sustained and favorable” manner while “protecting reforms and investments in strategic areas such as digital, green, social and defense.”
As the Twenty-seven agreed in December, each country will design and agree with Brussels national multiannual adjustment plans. They will be based on a technical trajectory that the European Commission will propose to Member States with deficits and debts above the threshold. This trajectory will indicate how to ensure that at the end of the four-year adjustment period public debt is on a plausible downward trajectory or at prudent levels. Countries that commit to reforms and investments in priority areas to improve growth potential will see extended to seven years the adjustment period.
“The new rules will significantly improve the existing framework and ensure effective and enforceable rules for all EU countries. They will safeguard balanced and sustainable public finances, reinforce the focus on structural reforms and encourage investment, growth and job creation. employment throughout the EU,” said the Belgian Minister of Finance and current president of Ecofin, Vincent Van Peteghemon an agreement that he described as “balanced.”
“They will provide more space for investment, flexibility for Member States to ease their adjustments and strengthen the social dimension. With a case-by-case and medium-term approach, together with greater ownership, Member States will be better equipped to prevent austerity policies “, highlighted the socialist MEP Margarida Marques. Diplomatic sources highlight that the negotiations, despite the limited margin of the MEPs to tweak the text and avoid problems in a final procedure dominated by the urgency imposed by the European elections in June, have been developed in a “constructive” spirit.
Deficit and debt safeguards
The Council reached the final stretch of the negotiation with the European Parliament with little “Room for maneuver” after a very tough tug of war with Germany and the frugal countries that forced the rest of the member states to introduce safeguards to limit the margin of governments, also in the preventive arm of the Pact. The final agreement maintains the safeguards agreed to by the Twenty-seven to guarantee the reduction of the deficit and debt. This means that countries with excessive debt will have to reduce the level by 1% annually if it exceeds 90% of GDP and by 0.5% if their debt is between 60% and 90% of GDP. These provisions, as highlighted by the European Parliament, are less restrictive than the current framework that requires each country to reduce debt annually by one twentieth when it exceeds 60%. In terms of safeguarding the deficit, governments will also have to reduce the deficit to a level of 1.5% to create a cushion against future crises.
To convince the France e Italia also introduced a number of exemptions to allow a more gradual adjustment. Furthermore, at the request of a Member State, the Council may allow a country to deviate from the spending path when exceptional circumstances beyond its control lead to a significant impact on its public finances. “A deadline for such a deviation would be specified, but this period may be extended if exceptional circumstances persist. The extension would be a maximum of one year and may be granted more than once,” the European Parliament said in a statement.
Social convergence
The European Parliament has emphasized that it has managed to strengthen the social dimension, within the process of monitoring public accounts. “The Commission will measure both the application of the principles of the European Pillar of Social Rights and the risks to social convergence” and “Member States must ensure that their national plan also contributes to social objectives”, underlines the European Parliament, which emphasizes that cyclical elements of unemployment benefit spending will not be taken into account when calculating a government’s spending.
“This is good news for the European economy. It concludes a long journey to redesign the EU’s fiscal rules,” celebrated the commissioner for economic affairs, Paolo Gentiloni. The new framework will come into operation next year on the basis of national plans to be submitted by Member States in the second half of the year. A period that, according to the Community Executive, leaves enough time for governments.
#seals #reform #fiscal #rules #flexibility #governments