The Swedish Presidency of the Council of the European Union notes that Member States’ views on a reform of the European economic governance framework “are converging in a number of key areas”, according to a note dated Tuesday 7 February, based on discussions so far at Member State expert level and which will serve as a basis for ministerial discussions at the Ecofin Council on Tuesday 14 February.
“There appear to be shared views that national fiscal-structural plans could be prepared by Member States and outline a medium-term fiscal adjustment path and be accompanied by priority reforms and investments”, notes the Swedish Presidency. These plans, assessed by the European Commission and approved by the EU Council, would promote a budgetary adjustment “calibrated to reflect country-specific public finance challenges” and would be flexible enough to evolve with changes in government at national level, the Presidency adds.
The Swedish note does not, however, mention the duration of the national plans, whereas the Commission suggests that they should cover a period of between four and seven years (see EUROPE 13060/1).
Nevertheless, several “important areas” require further discussion, such as the balance between differentiation in fiscal adjustment paths and maintaining fiscal surveillance anchored in common rules. While it considers the political commitment of national authorities to be “essential”, the Swedish Presidency stresses that rules derived from a common European framework are “indispensable to ensure predictability, transparency, equal treatment and policy coherence in the Union”.
The German Finance Minister, Christian Lindner, regularly stresses the importance of a multilateral approach with the ability for the Commission to ultimately propose sanctions in the event of infringement (see EUROPE 13111/19).
Asked about the issue on Thursday 9 February, a European diplomatic source said that neither the Member States nor the European Commission intend to achieve a “bilateralisation” of discussions on national budget programmes. “There is agreement on the need to maintain a multilateral framework and peer pressure. However, if left solely in the hands of the Commission, the system will lack persuasive effect”, it considered.
Other issues that need to be addressed are the analysis of public debt sustainability, including the parameters that will be used for this purpose, and how to integrate debt challenges into Member States’ determination of their fiscal mix.
“The sensitivity of analyses of public debt dynamics to changing assumptions about the economy raises questions”, notes the Swedish Presidency.
On this point, several Member States have been calling for several weeks for more details on the criteria and parameters that the Commission intends to use to analyse the sustainability of a public debt and to establish with the country concerned a quantified and viable path for reducing excessive debt, depending on national specificities and the duration of the national plan.
The implementation of such a method would make it possible to delete from the revised Stability Pact the so-called 1/20th rule for the annual reduction of the public debt, which is never applied because it is too restrictive.
Finally, questions remain among Member States on how to better integrate measures for the early identification and reduction of macroeconomic imbalances into national multi-annual budget plans.
The EU Finance Ministers will continue their discussions at the March Ecofin Council. The aim, according to the Swedish Presidency, is to provide guidance to EU leaders, who may address the issue at the Spring European Council on 23-24 March. It would then be up to the Commission to present a formal proposal again in the spring.
Because of the likely assumption that there will be a gap between the time when the current Stability Pact becomes applicable again in early 2024 and the time when a revised European economic governance framework will be applicable, the Commission will provide guidance on fiscal policy for 2024 in early March.
See the Swedish Presidency note: https://aeur.eu/f/5aq (Original version in French by Mathieu Bion)