European finance ministers and their Latin American counterparts will meet for the first time on Friday 15 September in Santiago de Compostela, with the aim of advancing a common agenda on investment and reform of the international financial architecture.
At the EU/CELAC summit in mid-July, European, Latin American and Caribbean leaders identified around thirty investment projects in sectors such as critical raw materials, digital technology and transport, which could benefit from a €45 billion envelope from the European Union as part of the ‘Global Gateway’ initiative (see EUROPE 13224/1). In Santiago de Compostela, progress will be made on governance and a follow-up mechanism on the basis of a note from the Spanish Presidency of the Council of the EU, host of the informal meeting.
In the presence of the major international financial institutions (IMF, World Bank, IDB, EIB), the fifty or so ministers present will reflect on the reform of the international financial architecture in preparation for the UN General Assembly at the end of September and the forthcoming IMF and World Bank meetings in Marrakech (9-15 October). In particular, they will discuss the prospects for reform of the IMF quota system, the changing role of the multilateral development banks and the treatment of the sovereign debt of developing countries.
Saturday 16 September will be devoted exclusively to European issues. At breakfast, the European Commission will present its summer economic forecasts, which point to a more pronounced slowdown in growth in the euro area, due in particular to the recession forecast for Germany in 2023 (see EUROPE 13248/1).
EIB. The Belgian Minister is expected to give an update on the procedure for appointing the future President of the EIB, to replace the German Werner Hoyer from January 2024 (see EUROPE 13235/14).
No decision is expected to be taken on Saturday, a source in the French Finance Ministry said on Thursday 14 September, pointing to the large number of candidates still in the running - Spain’s Nadia Claviño, Denmark’s Margrethe Vestager, Italy’s Daniele Franco, Poland’s Teresa Czerwińska and Sweden’s Thomas Östros - and decision-making rules that require a qualified majority of countries representing 68% of the EIB’s capital.
The ECB’s decision to favour the candidacy of the German Claudia Buch for the Chair of the Single Supervisory Mechanism (SSM) over that of the Spaniard Margarita Delgado may be interpreted as favouring the candidacy of the Spanish Finance Minister for the EIB (see EUROPE 13249/38). Ms Calviño has indicated that she will not be campaigning in Santiago de Compostela. Ms Vestager and Mr Franco were present on Thursday afternoon on the plane from Frankfurt to Santiago de Compostela.
Stability Pact. On Saturday morning, Ms Calviño could present her counterparts with avenues leading to a possible balance in the EU Council on the reform of the Stability and Growth Pact. Depending on the reactions it receives, the Spanish Presidency could draw up a draft compromise that would be submitted to the Member States with a view to a first attempt at a political agreement at the Ecofin Council meeting to be held on Tuesday 17 October in Luxembourg.
During the summer, technical meetings continued at an intense pace on the basis of the Spanish note, submitted to the national delegations in July. It identified four areas of work: - institutional balance; - benchmarks for reducing public debt; - creating sufficient room for manoeuvre to stimulate investment and structural reforms; - ownership and control of compliance with future European fiscal rules (see EUROPE 13244/19).
According to a national diplomatic source contacted on Tuesday, technical work on the reform of the Pact has progressed at a steady pace this summer. Almost three quarters of the legislative content is reportedly stabilised. The remaining quarter is more political. Because of the tight deadline (1.30 hours), no breakthrough is expected during Saturday’s session, but bilateral discussions will be going well with a view to forging alliances, said this source.
One of the hardest points concerns the setting of benchmarks. Broadly speaking, Germany, supported by the ‘hawkish’ countries, is still asking for stricter criteria (a 1% reduction in annual debt), while the proposal requires debt to have fallen after 4 years of application of the national macro-budget plan (see EUROPE 13170/1). On Thursday, this French source even rejected the provisions of the Commission’s initial proposal, while assuring us that France was ready to negotiate a reduction in the debt that would begin after the plan’s period of application.
Another difficult point concerns the automatic opening of an excessive deficit procedure on the basis of debt. The northern countries of the EU advocate automaticity, while the southern countries, which are more exposed, advocate a reasoned approach. Before taking a decision to initiate infringement proceedings, the Commission must take into account relevant factors that may explain a deviation from the fiscal consolidation path. During the current discussions, there is talk of increasing the number of these factors, in particular military expenditure.
The reform of the Pact will not introduce a golden rule to exclude certain expenditure, such as investment in climate transition from the calculation of the public deficit. However, several countries - Spain, France, Italy and Portugal - are requesting that the national cofinancing rate for projects receiving European financial aid and the interest on loans received under the Next Generation EU Recovery Plan should not be taken into account.
Finally, the ministers will also discuss the interaction between fiscal and monetary policies in an economic environment marked by high inflation, in the light of the decisions taken by the ECB Governing Council on Thursday (see other news). They will discuss as well the issue of the EU’s strategic autonomy, after the Commission announced the opening of an anti-subsidy probe into Chinese electric vehicles. (Original version in French by Mathieu Bion)