The Czech Presidency of the Council of the European Union will sound out the finance ministers of the Member States ,on Saturday 10 September in Prague, on a reform of the European economic governance framework, which it says has now “reached its limits”.
In a preparatory document for these discussions, a copy of which was given to EUROPE, the Czech authorities point to several difficulties that have been exacerbated by recent external crises - the Covid-19 pandemic, the Russian invasion of Ukraine -: an “alarming” level of public debt, the pro-cyclicality and complexity of the Stability and Growth Pact, a low level of ownership of fiscal rules at national level, and difficulties in enforcing the rules.
“Ensuring sustainable public finances through a gradual reduction of high public debt is of utmost importance” and postponing fiscal adjustment would only increase the difficulties of dealing with new crises, the authors of the Czech note argue, while acknowledging the importance of combining investment and reforms to boost the capacity to generate economic growth.
Saturday’s discussion on reforming the European economic governance framework will be “the last opportunity” for Member States to voice their expectations before the European Commission presents its reform proposals in the coming weeks, an EU source said on Tuesday, 6 September. According to this source, an agreement at European level would be necessary in the spring of 2023 under the Swedish Presidency of the EU Council so that Member States could prepare their 2024 budgets accordingly, as the derogation clause in the Pact is due to expire at the end of 2023.
Once the Commission’s communication is unveiled, the Czech Presidency will have to initiate formal discussions at subsequent Ecofin Council meetings.
Several Member States have individually or collectively circulated their positions for a reform of European fiscal rules: Germany (https://aeur.eu/f/2uu ), Spain and the Netherlands (see EUROPE 12925/2) and a group of eight ‘frugal’ countries (see EUROPE 12788/1).
“After almost 2 years of discussions, divergent opinions remain on numerous aspects”, admit the Czech authorities, for whom “no structured compromise seems to be emerging yet” beyond the need to reaffirm major principles such as “the long-term sustainability of public finance and a simplification of rules”.
During a visit to Brussels, the French Secretary of State for European Affairs, Laurence Boone, said that the pace of public debt reduction should be differentiated. “We want something where everyone can defend their trajectory”, she said, insisting on national ownership of the rules.
See the Czech note: https://aeur.eu/f/2yl (Original version in French by Mathieu Bion)