The Eurogroup will hold an exchange of views on Monday 5 December on the euro area-specific aspects of the reform of the European economic governance framework on the basis of the recent proposals of the European Commission (see EUROPE 13060/1).
First, without a formal vote, the nineteen members will appoint their President, Paschal Donohoe, for a second two-and-a-half year term starting in mid-January. The Irish Finance Minister, who will become Budget Minister due to a cabinet reshuffle, is the only candidate for re-election (see EUROPE 13070/32).
Stability Pact. At the beginning of November, the Commission proposed to Member States to simplify the European economic governance framework by introducing a public expenditure criterion designed to put Member States’ public finances on a credible path to reducing public debt. The pace of debt reduction would differ from country to country, with more time given in exchange for concrete commitments to reforms and investments in a contract.
This increased differentiation, designed to increase national ownership of measures, would be accompanied by stricter enforcement of EU rules, notably by launching procedures for excessive deficit and/or public debt that could lead to financial sanctions for euro area countries. The size of these sanctions would also be reduced to make them enforceable.
On Monday, the Eurogroup will discuss specific euro area aspects of the reform, such as financial sanctions or post-rescue plan budgetary surveillance.
In the first technical discussions in the EU Council, Germany is reported to have taken a hard line, especially on the possibility of further differentiating national budgetary paths.
The Ecofin Council will discuss this issue on Tuesday 6 December. On the other hand, the Euro Summit, scheduled for mid-December on the sidelines of the EU summit, has been cancelled, a source confirmed on Thursday 1 December.
DBPs 2023. The Eurogroup will discuss the Commission’s assessment of the seventeen national draft budgetary plans (all except Italy and Latvia) for 2023 and adopt a specific declaration (see EUROPE 13068/23).
The EU institution only makes qualitative recommendations, as the general escape clause of the Stability and Growth Pact will remain active until the end of next year. Broadly speaking, low-debt countries are encouraged to maintain a broadly neutral fiscal stance, while high-debt countries should keep public expenditure growth below their medium-term potential growth.
Belgium and Portugal, classified as highly indebted countries, and Austria, Lithuania, Germany, Estonia, Luxembourg, the Netherlands, Slovenia and Slovakia, classified as low indebted countries, are invited to take measures to comply fully with these recommendations.
More information on the draft budgetary plans of the euro area countries: https://aeur.eu/f/46r
Recommendation for the euro area. The Ministers will also discuss the draft fiscal policy recommendation for the euro area, which calls for a broadly neutral stance for the 19 countries by 2023. They will endorse it at their January meeting.
See the draft recommendation for the euro area: https://aeur.eu/f/46q
Energy prices. In addition, the Eurogroup will take stock of the emergency budgetary measures taken to support households and businesses affected by the surge in energy prices exacerbated by Russia’s armed aggression against Ukraine. About 70% of these measures are of a cross-cutting nature, while the Commission and the ECB recommend targeted, temporary and tailored measures in order not to increase inflationary pressure.
This discussion will be an opportunity to test the willingness of Member States to coordinate their actions without pushing for a specific model of measures, the EU source said.
It should be noted that the Commission and the ECB advocate a ‘two-tier system’ where energy prices would be subsidised up to a ‘reasonable’ level of consumption, beyond which consumers would pay market prices as an incentive to use less.
Greece. Finally, the Eurogroup will take note of the fiscal surveillance reports of the euro area countries that have been subject to rescue plans.
For Greece, the Commission suggests a final debt service relief of around €6 billion (see EUROPE 13068/23). An amount of €644 million will correspond to repayments to Athens of profits made by the European System of Central Banks on the holding of Greek debt (SMP/ANFA operations). An amount of €5.2 billion would correspond to the final removal of the step-up margin applied to loans granted in 2012 and due to be repaid by 2049.
See the Post-Programme Surveillance Report: https://aeur.eu/f/46s (Original version in French by Mathieu Bion)