On Thursday, 4 March, the members of the European Parliament’s Committee on Economic and Monetary Affairs welcomed the European Commission’s proposal to extend the freeze on the Stability and Growth Pact until the end of 2022, as long as growth in the European Union has not returned to its pre-Covid-19 level (see EUROPE 12670/1).
Representing the S&D Group, Joachim Schuster from Germany was pleased with this initiative. Echoing statements made by European Commissioner for the Economy Paolo Gentiloni, Ernest Urtasun (Greens/EFA, Spain) thought it was better to do too much in terms of public budget support for the economy than too little.
The debate mostly focused on the future of European fiscal rules once the pandemic has been overcome. “Can we go back to the old rules?” asked Mr Schuster. Billy Kelleher (Renew Europe, Ireland) wondered how to ensure that phasing out public aid will not have adverse consequences on recovery.
Conversely, Eugen Jurzyca (ECR, Slovakia) expressed concern about the very high levels of public debt in certain countries—levels that are likely to worsen with the spending planned under the Next Generation EU Recovery Plan.
European Commission Vice-President Valdis Dombrovskis reiterated that a decision regarding the general escape clause in the Stability Pact had been taken in March 2020 due to a severe economic downturn. Once economic recovery has been sufficiently established, Member States will need to shift their support from emergency measures to more targeted and differentiated support.
He stressed that the European Commission will take account of the fact that Member States are not starting at “the same starting point” to put their public finances back on a sustainable medium-term path. Heavily indebted countries will thus need to adopt prudent fiscal policies more than those with leeway. However, Mr Dombrovskis ruled out any causality between the return of the Stability Pact’s application and its future reform.
Golden rule for ‘green’ investments. With regard to the reform of the Stability Pact, Mr Dombrovskis outlined several avenues for reflection. Referring to the European Fiscal Board’s proposals, he indicated, “There could be scope to discuss not only a golden but a green rule” to stimulate investment in green and digital transitions (see EUROPE 12360/5).
“We need Member States with a strong capacity of investment. One of the mainstream of fiscal rules’ reform”, Mr Gentiloni added. He pointed out that the pandemic had also led to a high level of private savings that needed to be reinjected into the economy.
Another project will concern simplifying the pact. In response to a question from Luděk Niedermayer (EPP, Czech Republic), Mr Dombrovskis stated that it is possible to move away from indicators that are difficult to measure, such as the calculation of the “structural deficit”, in order to move towards more easily observable criteria such as the level of expenditure. (Original version in French by Mathieu Bion)