The European finance ministers continued their discussions, on Tuesday 17 October, mainly in camera, on the reform of the European economic governance framework, with the Spanish Presidency of the Council of the European Union setting the end of the year as the deadline for reaching a political agreement.
The Spanish minister, Nadia Calviño, spoke of constructive discussions that had helped to clarify the issues at stake. She said she hoped to be able to present her counterparts with a compromise legislative text at the Ecofin Council on Thursday 9 November.
According to our information, the Spanish Presidency has submitted three working documents (‘landing zone’), including two last week, setting out options on the four most political elements identified back in July: - institutional balance; - common safeguards 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 13222/14).
Each working document aims to move closer to the German position, to no avail so far. In particular, one proposed considering the reduction in public debt as an average over a period of between 14 and 17 years (see EUROPE 13262/13). Another takes up the Commission’s idea that a country’s public debt should be lower than it was at the start of the macro-budget plan, with Member States detailing the investments and reforms they will implement over a period of four to seven years. A third document maintains the idea of an average reduction in public debt.
Eager to introduce uniform quantitative criteria for budget consolidation, Germany is sticking to the line it adopted in April that the most heavily indebted countries should reduce their debt by 1% a year (see EUROPE 13158/15).
“For Germany, it is clear that a credible, long-term reduction in the public debt ratio is only possible if the annual deficits are also taken into account and reduced”, said the German Minister, Christian Lindner. Considering the threshold of 3% of GDP enshrined in the European treaties as “an upper limit”, he suggested “a safety margin” to ensure that Member States in the preventive arm of the Stability and Growth Pact reduce their deficits even further.
Austria, the Baltic States and Sweden support Germany in reducing public debt. The Netherlands, like Finland, appear to be more nuanced in their comments, even though the Dutch minister, Sigrid Kaag, had insisted the previous day on the importance of future European fiscal rules introducing a “significant” trajectory for reducing public debt.
France is said now willing to accept the concept of binding quantitative criteria for reducing excessive public debt. Its minister, Bruno Le Maire, recommended focusing first on “a key indicator” that would promote a “credible and gradual reduction of the debt”. He pointed out that some countries want stricter and more binding indicators, with the same reduction figures for each year, while others advocate a “more global assessment, such as an average over five years”. In his opinion, these assessments are different, but do not constitute blocking points. However, he pointed out that “the objective is not to have the lowest possible debt, but a sustainable level of debt, compatible with the level of growth and investment for the climate transition” and taking into account the situation of each country. And Mr Le Maire expressed his hope for a Franco-German agreement to unblock the situation.
During the public debate, Italy was the only country to take the floor. The Italian minister, Giancarlo Giorgetti, called for national co-financing linked to investments in post-Covid-19 recovery plans to be taken into account, as well as public spending on European strategic priorities, such as defence.
If requests for a golden rule encompassing certain public spending are out of the question, it will be a matter of taking this spending into account as a relevant factor in the event of the opening of an infringement procedure of the fiscal rules.
However, according to our information, the Italian request on national co-financing is not included in the latest Spanish ‘landing zone’ unlike the inclusion of interest on loans taken out to finance post-Covid-19 national recovery plans. (Original version in French by Mathieu Bion)