EU finance ministers will discuss, on Tuesday 14 March, the forthcoming reform of the European economic governance framework and the budget guidelines for 2024 that the European Commission recently presented.
After a first round of discussions in February (see EUROPE 13121/3), the ministers will continue their discussions on the reform of the Stability and Growth Pact, as envisaged last November by the Commission. They will adopt, without amendment, the draft conclusions submitted to them by their experts.
The text shows converging positions on the following elements: - the medium-term approach through the development of multi-annual national plans which will detail the budgetary targets, reforms and investments envisaged; - the possibility of extending the duration of these plans to include additional measures supporting the climate and digital transitions and strengthening military capabilities; - differentiating fiscal paths according to national debt situations; - maintaining a common supervisory framework allowing for less stringent but more automatic financial and/or reputational sanctions.
Germany welcomes the provisions that will be developed to prevent procrastination in the implementation of structural reforms.
Nevertheless, Member States recognise that further discussions will be needed, once the legislative proposal is presented, on several elements. This concerns the establishment of a possible path for low-debt countries, the advisability of developing common quantitative benchmarks to establish a path for consolidating public finances, or the principles that would allow for a relaxation of a fiscal path over time.
These common quantitative milestones - such as the (never applied) 1/20th rule for the annual rate of reduction of public debt - wanted by Berlin, may lead to fears that the most indebted countries will be left with rules that are too restrictive. It is always the debate between “equal treatment and taking into account national specificities”, commented a diplomatic source for whom, even if the trajectories are differentiated, “some countries will have to make more efforts than others”.
Once these conclusions are adopted, the Spring European Council will take them on board. The Commission is expected to present its legislative proposal shortly, in early April, with the aim of reaching a political agreement in the EU Council under the Spanish Presidency of the EU Council, and with the European Parliament before the end of the current legislature.
See the draft conclusions: https://aeur.eu/f/5ni
Budget guidelines for 2024. After the Eurogroup (see other news), the Ecofin Council will discuss the Commission’s guidelines for budgetary and economic policies for next year (see EUROPE 13137/6).
Despite the high degree of uncertainty, the risk of an economic recession in the EU appears to be averted. The Commission therefore confirms the return to full application of the fiscal rules with fiscal and socio-economic policy recommendations for 2024 that will contain qualitative and quantitative targets. Infringement procedures for excessive government deficits could be initiated for countries whose budgetary trajectory is still far from the 3% deficit threshold.
The Commission also incorporates some elements of the EU economic governance framework, as it could be reformed, notably by including a single indicator of public expenditure and differentiating the efforts required according to national situations.
On Thursday, Germany criticised the EU institution’s approach. It does not want a precedent to be set through the application of principles that are still under discussion. On the contrary, the French side considers the Commission’s approach to be pragmatic. No one around the table, not even Germany, would dare ask Italy to apply the 1/20th rule of the Pact to reduce its public debt, a source at Bercy said on Friday 10 March.
Recovery and Resilience Facility. The Swedish Presidency of the Council of the EU also wants to survey the Member States on the state of preparation of the ‘REPowerEU’ chapter that they will include in their national recovery plans as part of the European Recovery Plan (see EUROPE 13136/15). On Friday, Estonia presented its specific chapter at the European level.
See the Swedish Presidency note: https://aeur.eu/f/5ny
On Tuesday, the ministers will approve Finland’s revised recovery plan without discussion.
See the draft EU Council decision approving this revision (https://aeur.eu/f/5qp ) and its annex (https://aeur.eu/f/5r1 ).
Energy prices. The Ecofin Council will also discuss the application of the EU gas price cap mechanism, which was introduced at the end of 2022 to curb price increases.
The Commission will soon present an extension of this mechanism to other price trading points than the Title Transfer Facility (TTF) (see EUROPE 13137/8).
Budget. Without debate, the ministers will adopt guidelines on the EU’s 2024 budget (https://aeur.eu/f/5g0 ), which the Commission will propose in the spring. They will give discharge to the European Commission on the implementation of the EU budget for 2021 (https://aeur.eu/f/5g1 ).
Finance. Finally, the European Commissioner for Financial Services, Mairead McGuinness, will report on the progress of financial dossiers. The interinstitutional negotiations on the Alternative Investment Fund Managers Directive ‘AIFMD’ (see EUROPE 13106/22) and on the European Single Window ‘ESW’ (see EUROPE 13111/18) started on Wednesday 8 March. (Original version in French by Mathieu Bion with Anne Damiani)