The President of the Eurogroup, Paschal Donohoe, cast doubts, on Thursday 29 June, on the ability of European finance ministers to agree on the introduction of a ‘golden rule’ that would allow certain public investments to be excluded from the calculation of the deficit as part of the ongoing reform of the Stability and Growth Pact.
“Some Member States are making the case for (a golden rule). But if you begin to say that some form of expenditure will be excluded, you'll have other governments making the case for other expenditure. It would create difficulties down the road on how the expenditure benchmarks can be implemented”, said Mr Donohoe in response to questions from France Jamet (Identity and Democracy, French) and Denis Nesci (ECR, Italian), during a discussion with the European Parliament’s Committee on Economic and Monetary Affairs.
He did stress the importance of striking the right “balance” in the current negotiations between a gradual reduction in the deficit and public debt and support for investment in the climate and digital transitions through the implementation of national recovery plans.
Convinced that an agreement by the European legislator on the reform is possible before the end of the current legislature, and even desirable so as not to add new budgetary risks to the current macroeconomic uncertainty, the Irish Minister advocated a revised framework that is transparent, enforceable and conducive to Member States taking ownership of the rules.
Asked by Margarida Marques (S&D, Portuguese), the European Parliament’s co-rapporteur on the reform, about a possible point of balance, Mr Donohoe remained very cautious. He did not deny the differences of opinion that had emerged publicly, such as France’s refusal to introduce binding quantitative criteria for reducing public debt, contrary to Germany’s demands (see EUROPE 13203/2). However, in his view, the Member States consider the legislative proposal presented to be “a good basis to work from”, he noted.
Among the points on which compromises will be necessary, he cited the way to stimulate investment and the reduction of public debt.
Mr Donohoe also pointed out that in July, the Eurogroup will make recommendations on the fiscal stance for the euro area in 2024. He admitted that economic growth in the euro area expected to reach 3.5% of GDP by 2022, had lost momentum at the start of the year due to “more difficult” macroeconomic conditions.
Nevertheless, by 2023, growth will have returned, and euro area countries need to take advantage of this situation to consolidate their public finances, by dismantling the emergency budgetary measures taken to help households and businesses affected by the energy crisis. In so doing, the President of the Eurogroup believed that fiscal policy was helping to fight inflation.
Banking Union. Questioned by Ville Niinistö (Greens/EFA, Finnish) on the Banking Union, Mr Donohoe said that the finalisation of the ratification of the reform of the European Stability Mechanism (ESM), blocked by Italy (see EUROPE 13203/7), as well as an agreement on the ‘CMDI’ proposal to strengthen the European framework for managing a banking crisis would create the conditions for moving forward on other issues leading to the completion of the Banking Union in the euro area.
To Paul Tang (S&D, Dutch), who was critical of Italy’s attitude, he reported regular discussions with the Italian authorities. In his view, the Italian government should listen to the argument that finalising the reform of the ESM would make the euro area’s permanent rescue fund accessible to countries in difficulty under new conditions. (Original version in French by Mathieu Bion)