Twenty-Seven agree on a relaxation of EU fiscal rules

The Twenty-Seven agreed on Wednesday on a relaxation of European fiscal rules, which should guarantee the recovery of public finances without jeopardising investment.

In Brussels, the Twenty-Seven are working on the difficult equation of the European budget. Riccardo Pareggiani / POOL / AFP

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EU finance ministers have approved "a new economic governance framework that guarantees stability and growth", the Spanish presidency of the Council of the European Union said on X (formerly Twitter).

The reform aims to modernise the Stability Pact, a "budgetary corset" created at the end of the 1990s that limits the general government deficit for each country to 3% of GDP and the debt to 60%. It will allow for less abrupt adjustments for countries in difficulty. While confirming these emblematic thresholds, the new text must make the adjustment required of EU countries in the event of excessive deficits more flexible and realistic. Considered too drastic, it was never really respected.


Historic agreement! ", said the French Minister of Finance, Bruno Le Maire, on X. "This agreement provides for fiscal rules that encourage reforms, leave room for investment and are tailored to the specific situation of each member state," said his Dutch counterpart Sigrid Kaag.

Rules that are better adapted to the specific situation of each country

The agreement was made possible by a rapprochement sealed Tuesday night between France and Germany, long poles apart on the subject. Indebted countries in southern Europe, like France, insisted on additional flexibilities to protect the investment needed for the green transition and the military spending generated by Russia's invasion of Ukraine. On the other hand, the so-called "frugal" countries of the north, behind Germany, demanded constraints to achieve effective deleveraging throughout the EU.

Read alsoThe conundrum of the European budget

Time was running out to conclude the debates. The Stability Pact has been deactivated since the beginning of 2020 to avoid a collapse in economic activity affected by the Covid pandemic and then by the war in Ukraine. It will be reactivated on 1 January. Failure to agree on the new rules before that date would have affected the EU's credibility vis-à-vis financial markets.

The Twenty-Seven now hope to conclude the legislative process before the European elections in June on this text, which still needs to be negotiated with the European Parliament. The draft text provides for rules that are more tailored to the specific circumstances of each country. This would make fiscal trajectories both more realistic and better implemented.


With AFP)

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