EU finance ministers voiced their concerns to the European Commission on the reform of the European economic governance framework on Saturday 10 September at their informal meeting in Prague.
Describing the discussions as “very useful”, Czech finance minister Zbyněk Stanjura said that beyond their “different viewpoints”, the Member States agreed that “the rules have to be clear and they have to be enforceable and that means they have to be realistic”. In addition, Member States should be able to take ownership of the rules, he said.
The President-in-Office of the Ecofin Council noted that the Stability Pact requires Member States to keep their public debt below 60% of national GDP. However, the average public debt in the euro area is now “97% of GDP”, he noted, saying it was difficult to explain to citizens how such a gap was possible.
Towards the end of October, the European Commission will present a communication in which it will set out its guidelines for a reform of European fiscal rules, a step that will officially re-launch a debate that was initiated even before the Covid-19 pandemic, then re-launched last autumn (see EUROPE 12815/5) before being interrupted again at the beginning of 2022 due to the emergency situation linked to Russia’s invasion of Ukraine. The Ecofin Council could be invited to discuss the Commission’s guidelines as early as November.
In Prague, European Commission Vice-President Valdis Dombrovskis summarised a reform outlined by European Commissioner for Economy Paolo Gentiloni earlier in the week at a conference of the Bruegel think tank (see EUROPE 13016/11). The future regulatory framework should promote a “realistic, gradual and sustained” reduction in public debt, stimulate investment and enable greater compliance.
He called for differentiation in the ‘no one-size-fits-all’ debt reduction trajectories assigned to Member States. And this “leeway” would be compensated by a stricter enforcement of the rules. Another avenue of reform envisaged, according to Mr Dombrovskis, is the simplification of rules through the introduction of a “single observable indicator” such as an “expenditure benchmark”, particularly in the case of excessive public debt.
Mr Dombrovskis noted a “rather broad” agreement among ministers on the overview but warned that “the devil is in the detail” and that nuances will emerge once Member States have seen the detailed content of the Commission’s guidelines. Asked by EUROPE, the Commission Vice-President said that the revised rules could be in place by the end of 2023 “depending on how quickly a consensus emerges among Member States”.
On Friday 9 September in Prague, German finance minister Christian Lindner stressed the need to strike the right balance between investment in the climate and digital transitions and a return to stable public finances. In 2023 Germany intends to reinstate its constitutionally enshrined ‘public debt brake’, which was put on hold to allow for emergency budgetary measures to tackle the pandemic.
At the beginning of August, the German finance ministry presented its proposals for a reform of the fiscal rules. Link to the proposals: https://aeur.eu/f/2uu
France is in favour of common rules allowing for differentiation in the pace of public debt reduction. It may present a specific proposal in the coming weeks.
It is not clear at this stage whether this reform of the rules, which will be initiated by the Commission’s communication at the end of October, will result in specific legislative proposals. (Original version in French by Mathieu Bion)