The chronological sequence of discussions between Member States on the revision of fiscal rules is becoming clearer, with the potential outcome of presenting a legislative proposal “mid-year”, as indicated on Tuesday 18 January by the European Commission’s Executive Vice-President, Valdis Dombrovskis.
The day before, at the end of the Eurogroup meeting, the European Commissioner for the Economy, Paolo Gentiloni, had indicated that the European Commission would first present “guidance in the coming weeks” on the economic and fiscal policies expected from the Member States for 2023.
At their informal meeting on 25-26 February in Paris, EU Finance Ministers will discuss the revision of the Stability and Growth Pact. “We will have discussions on this subject at the Ecofin Council in February”, French Minister Bruno Le Maire confirmed on Tuesday. “The debate between frugal and spendthrift States is outdated”, he said, advocating finding the “right balance” between “sound public finances and the need to invest to address climate and digital transitions”. And he wanted to put an end to the “Brussels legend” about possible differences of opinion on the issue with his German counterpart, Christian Lindner.
Fiscal and budgetary issues will also be discussed at the special European summit on 10-11 March, which will be devoted to defining a European growth model (see EUROPE 12870/10).
In the spring, presumably as part of the process of country-specific socio-economic policy recommendations to Member States, the Commission will present its conclusions on the discussions on the reform of the fiscal rules. According to Mr Gentiloni, the EU institution has already received 250 contributions to the consultation on the reform of the Pact, which was re-launched in mid-October (see EUROPE 12815/5).
The Ecofin Council, or even the June Euro Summit, could take political decisions on the reform of the fiscal rules, which the Commission would then transcribe into a legislative proposal to be presented in July.
However, Mr Dombrovskis acknowledged, it seems “unlikely” that legislative proposals tabled in the middle of the year will be agreed in time to apply starting 2023, when the general escape clause that ‘froze’ the Pact to allow Member States to deal with the Covid-19 pandemic will be deactivated unless there is a major downturn in the economy.
That is why we will propose this guidance for economic and fiscal policies in 2023 which should provide “a bridging solution”, the Vice-President continued, until reform is implemented. He cited the example of the interpretative communication on the flexibility of the Pact, which the Commission had presented in January 2015 to stimulate structural reforms and facilitate public investment (see EUROPE 11229/13).
Between now and the summer, the Eurogroup will regularly discuss this issue, with the euro area countries playing a central role. On Monday, he mentioned specific elements, such as national ownership of the rules or how to enforce them in case of infringement, given that no euro area country has been sanctioned for excessive deficit or debt since the creation of the single currency.
We heard “a great deal of feedback” from Ministers on these points, Eurogroup President Paschal Donohoe noted after the meeting. But the Eurogroup is not expected to make a written contribution to the consultation on the European fiscal rules.
See the Commission’s note on specific fiscal aspects of the euro area: https://bit.ly/3KjNVRI (Original version in French by Mathieu Bion)