The European finance ministers will attempt to reach a political agreement in principle, on Friday 8 December, on the reform of the Stability and Growth Pact with a view to rapidly starting interinstitutional negotiations with the European Parliament, as the MEPs are expected to adopt their negotiating position on Monday 11 December in Strasbourg.
To facilitate the search for an agreement, the ministers were invited to a dinner on Thursday evening, at the end of the Eurogroup meeting, to discuss the last – and most political – elements still outstanding.
These discussions will be based on the compromise texts submitted by the Spanish Presidency of the Council of the European Union, which EUROPE detailed in its previous edition (see EUROPE 13308/1). Our compromise proposal aims to achieve “rules that are simpler to apply, better adapted to economic reality and more balanced, guaranteeing a credible reduction in debt in a way that is compatible with productive investment”, declared the Spanish Finance Minister, Nadia Calviño, on Thursday 7 December, on her arrival at the Eurogroup. “I have warned the ministers that it will be a long night” in order to reach a political agreement on a Spanish proposal which, judging by the positive and negative reactions, has “probably struck the right balance”, she added.
Deeming an agreement “possible”, German Finance Minister Christian Lindner said that Germany and France had made “great strides towards each other” in the course of intensive bilateral work, with the result that the two countries agree on “90% of the rules” on the table. He said that he hoped to build “a bridge” to reconcile divergent positions, notably on the question of the level of adjustment required in the event of an excessive deficit procedure (EDP). But he pointed out that the conclusions of the EU Council in March had stressed that the EDP procedure will not be modified (see EUROPE 13141/22). This remains the German position.
Earlier in the day, the French Finance Minister, Bruno Le Maire, announced that France accepts the numerical criterion for reducing public debt (1% of national GDP on an annual average basis, when debt exceeds 90% of GDP, or 0.5% of GDP if debt is between 60 and 90% of GDP) as well as the objective of reducing the public deficit to a level 1.5% below the legal threshold of 3% of GDP.
Mr Le Maire also said that he accepted the adjustment of 0.5% of GDP in structural terms for Member States in an excessive deficit procedure (the ‘corrective’ part of the Pact), while calling for “flexibility” of 0.2% of GDP so that Member States in an infringement procedure can continue to invest in sectors of the future, as required by the new economic situation. This “reasonable” request constitutes “an absolute red line” that France will not cross, he said.
But for other delegations, such a request could call into question the balance of the legislative text. “I understand France, but the problem is that we can’t change the adjustment level of 0.5% of GDP. This would mean renegotiating certain things”, said another diplomat. This one added that: “If you are in an excessive deficit procedure, you receive recommendations and have five or six years to get out of it. Germany and other countries are saying that giving so much time is already long”.
However, on the ‘corrective’ side of the Pact, discussions are underway on the possibility of quantifying the annual structural adjustment by excluding debt servicing (‘structural primary balance’). This change, which Germany remains opposed to, would make it possible to exclude the costs inherent in servicing public debt.
See the Spanish Presidency’s compromise proposals dated Tuesday 5 December on the ‘preventive’ (https://aeur.eu/f/a0p ) and ‘corrective’ (https://aeur.eu/f/a0q ) aspects of the Stability and Growth Pact.
EIB. Belgian Finance Minister Vincent Van Peteghem, who has been tasked with leading the informal discussions on replacing Werner Hoyer as President of the European Investment Bank (see EUROPE 13272/12), said he was “confident” that the ministers would be able to finalise these political discussions so as to initiate the formal nomination procedure.
In order to avoid an interim solution, Belgium had initiated a procedure of silence providing for the nomination of Ms Calviño, which was interrupted by Italy, Denmark and Poland, who each have their own candidate.
To be appointed, a candidate must have the support of 18 Member States representing 68% of the EU Bank’s capital. While Germany supports Ms Calviño (see EUROPE 13291/20), Mr Le Maire said he would reveal France’s position on Friday.
RRF. The Ecofin Council will also be called upon to validate the revised post-Covid-19 plans of thirteen EU countries, most of which contain a ‘REPowerEU’ chapter designed to accelerate the energy transition and reduce dependence on Russian hydrocarbons.
In addition to the revised plans of nine countries (Latvia, Belgium, Cyprus, Greece, Romania, Croatia, Poland, Finland and Bulgaria) already mentioned (see EUROPE 13307/17), the revised plans of Germany, Hungary (see EUROPE 13299/8), Italy and Ireland are also concerned.
Uncertainty remains over the approval of the ‘REPowerEU’ chapters of the Hungarian and Polish plans.
For more information on these revised plans: https://aeur.eu/f/a0z
Ukraine. The ministers will also take stock of the socio-economic repercussions of Russia’s military aggression against Ukraine, while on Tuesday 12 December the European Commission is due to present a proposal designed to mobilise the interest generated by frozen Russian public assets for the reconstruction of Ukraine.
Digital euro. The ministers will discuss, in public deliberation, a report from the Spanish Presidency on the progress of work on the ‘single currency’ package consisting of two legislative proposals, one to provide a legal framework for a potential digital euro (see EUROPE 13211/11), the other to anchor the accessibility and mandatory acceptance of the euro in its physical form (see EUROPE 13211/12).
Prior to this, the Presidency had sounded out the Member States on the main aspects of the digital euro project, in particular: - limits of use (see EUROPE 13282/8); - commissions linked to payment services (see EUROPE 13283/3); - the distribution model and accessibility of the digital euro (see EUROPE 13284/5).
Taxation. In the area of taxation, two reports will be approved without discussion.
The first (https://aeur.eu/f/a11 ) aims to inform the European Council of the progress made under the Spanish Presidency.
Regarding the state of play on tax issues under negotiation, “significant progress” has been made on the ‘VAT in the Digital Age’ (ViDA) package, according to a European source (see EUROPE 13298/11). A consensus has almost been reached on the first part of the dossier, the single registration. The second area, relating to digital platforms, is still under discussion, as several Member States want greater flexibility. Finally, the exchange of information on the basis of electronic invoicing is a highly technical issue, which will be discussed further during the Belgian Presidency of the EU Council, which begins on the 1st of January. This source said he was “optimistic” that the deal would be finalised in the next six months.
To see the progress report: https://aeur.eu/f/a10
The proposal for an ‘UNSHELL’ directive to prevent the misuse of shell companies for tax purposes (see EUROPE 13271/20) was not adopted, despite three compromise proposals from the Spanish Presidency.
The Ecofin Council is expected to adopt conclusions on the progress made by the Code of Conduct Group in the field of company taxation (see EUROPE 13304/23), in particular the progress made on the European ‘black list’ of uncooperative jurisdictions for tax purposes.
For further information: https://aeur.eu/f/a12
Own resources in the EU budget. Finally, the Spanish Presidency will present the ministers with a progress report on the work carried out by the EU Council on the EU budget’s own resources package, which includes three new types of revenue identified in 2021, as well as a new temporary statistical own resource based on company profits (see EUROPE 13205/2). These resources, which are intended to contribute to the repayment of funds raised by the EU to finance the Next Generation EU Recovery Plan, were the subject of a ministerial discussion in July (see EUROPE 13223/3).
To see the progress report: https://aeur.eu/f/a13 (Original version in French by Mathieu Bion, Anne Damiani and Bernard Denuit)