The rules of the Stability and Growth Pact derived from the Maastricht Treaty, currently frozen due to the Covid-19 pandemic, “are no longer relevant” and must be reviewed, simplified and made more flexible in order to support growth and act in a counter-cyclical way, said Margarida Marques on Friday 12 March in an interview with EUROPE. According to the Commission, the deactivation of the general escape clause of the Pact should take place after an “assessment of the health, economic and social conditions” and when a new regulatory framework is in place.
“We need to rethink the budgetary framework in the light of the impact of the pandemic”, and also because “debt and deficit rules have become goals and not tools”, said the MEP, who sent her draft report on the revision of the EU’s macro-economic regulatory framework to her counterparts in the Committee on Economic and Monetary Affairs the same day.
She called for a framework that could “promote growth, avoid pro-cyclical policies and create incentives to pursue a growth policy” in line with the European sustainability goals.
Ms Marques proposes the establishment of an ‘expenditure rule’ that sets a ceiling in nominal terms when a country’s public debt exceeds a certain threshold.
“I feel that there is a basis for a consensus on the public spending rule”, she said, after consulting a number of international experts and her counterparts in other political groups in the European Parliament. According to the Portuguese socialist MEP, the “very particular” political context has allowed the EU to respond differently to the pandemic compared to the 2008 financial crisis. “The big challenge is not to lose what we have gained during this period”.
As for the public debt, the Maastricht threshold of 60% of national GDP now appears to have been exceeded. Pointing to an environment of low interest rates, which should continue in the medium term also thanks to the ECB’s action, Ms Marques advocates “looking at debt servicing costs”, and growth.
The draft report calls on the European Commission to present a legislative initiative by the end of 2021, reforming the economic governance framework.
The MEP argues for the need to provide the EU with a ‘central stabilisation capacity’ by building on the experience of the Next Generation EU recovery plan, as well as making the ‘European Semester’ budgetary process less ‘bureaucratic’ and facilitating ownership by Member States, who remain responsible for their economic policies. In addition, the European Stability Mechanism (ESM), the permanent rescue fund for the euro area, will have to be brought within the scope of the Community method.
On Thursday, the European Parliament voted on the European economic governance framework, ending a political left/right divide that has widened since the May 2019 European elections (see EUROPE 12676/5).
Aware of the difficulty in reaching a compromise on this sensitive issue on the agenda of the Eurogroup meeting on Monday 15 March (see EUROPE 12675/26) and the ‘Ecofin’ Council the following day (see other news), Ms Marques holds to the aim of adopting the draft report at the European Parliament plenary session “in July”. “I will do everything to ensure that we have a report. This is a priority issue”, she said.
See the draft report: https://bit.ly/3bLR25t (Original version in French by Mathieu Bion)