In the first half of 2023, the Swedish Presidency of the Council of the European Union will be responsible for leading the discussions between Member States on the reform of the European economic governance framework.
The European Commission proposed last November to simplify the current rules by focusing on setting credible trajectories for reducing public debt, which has risen sharply since 2020 to cope with the Covid-19 pandemic and the energy crisis, while preserving Member States’ ability to invest in the climate and digital transitions (see EUROPE 13060/1). States would have more room to define measures and reforms leading to a consolidation of their public finances, but they would be faced with stricter control of the respect of the commitments made.
On this basis, the discussions in the EU Council will enter “an intensive phase”, predicts the Swedish Presidency in its political priorities for the first half of 2023. The Commission has put this issue on the provisional agendas of the February, March and June Ecofin Council meetings.
Considered a ‘frugal’ country from a budgetary point of view, Sweden signed a letter in September 2021 with seven other countries (Austria, Denmark, Finland, Latvia, Czech Republic, Netherlands, Slovakia) advocating for budgetary seriousness (see EUROPE 12788/1). It regularly rejects any idea of setting up a new European financial instrument to launch new investments through common debt, arguing the need to mobilise existing means, notably through the Next Generation EU Recovery Plan.
“The results of this review are important in terms of achieving responsible economic policy that supports a transition towards sustainable public debt and growth in all Member States”, says the Swedish Presidency, eager to “help build consensus”.
Parallel discussions will take place in the Eurogroup, as some of the proposals directly concern the euro area countries. For example, the issue of financial sanctions, which would become less severe to be really applied, only affects the twenty euro area members.
If a consensual political approach were to emerge, the Commission would be in a position to present potential legislative proposals in the wake of this. It will be difficult to adopt these in co-decision with the European Parliament by the end of 2023, the deadline for deactivating the Stability and Growth Pact general escape clause.
Inflation. Under the Swedish Presidency, the EU Council will monitor the economic and financial impact on the Union of the Russian military aggression in Ukraine, especially the abnormally high energy and food costs.
According to Eurostat, inflation peaked in the autumn of 2022 and has since fallen back to 9.2% in December (see EUROPE 13094/4). This should not prevent the ECB from continuing to raise its key interest rates, perhaps at a lower level than in previous hikes.
In the context of economic coordination, Member States will consider, among other things, the continuation of emergency aid to households and businesses most affected by the energy crisis.
Regarding macro-financial assistance to Ukraine, it is up to the Commission to implement the assistance of €18 billion to Ukraine over the whole year 2023 (see EUROPE 13083/27).
Under Next Generation EU, the Ecofin Council may be asked to approve the first instalments of aid to Poland and Hungary, if these two countries first adopt the reforms included in their respective recovery plans.
See the work programme of the Swedish Presidency of the EU Council: https://aeur.eu/f/4p5 (Original version in French by Mathieu Bion)