The European Parliament and the Member States of the European Union (EU) reached an agreement on the night of Friday February 9 to Saturday February 10 on a reform of the EU budgetary rules intended to guarantee the recovery of public finances while preserving the investments. The text discussed for more than two years is criticized for its great complexity and derided by left-wing elected officials as a tool installing austerity in Europe.
Europeans agree on a new budgetary framework
“I welcome the political agreement on our ambitious reform of EU economic governance,”“for a competitive and fair European economydeclared the President of the European Commission Ursula von der Leyen on the social network X. The new rules will allow EU countries to invest in their assets while consolidating their public finances..
Pressed for time, the negotiators finally reached an agreement after 16 hours of discussions. Given the procedural delays, it was absolutely necessary to conclude so that the text could be voted on in plenary session in Strasbourg in the spring before the parliamentary break which precedes the European elections in June.
Modernizing the Stability Pact
The agreement reached last night will allow Member States to apply the new rules this year for their 2025 budgets. “contribute to the balance and sustainability of public finances, structural reforms, the promotion of investments, growth and job creation in the EU”affirmed the Belgian presidency of the Council of the EU on X (formerly Twitter).
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The reform intends to modernize the Stability Pact, created at the end of the 1990s, which limits the public administration deficit for each country to 3% of GDP and the debt to 60%. Considered too drastic, this framework was never really respected and was considered obsolete.
A little more flexibility
While confirming these emblematic ratios, the new text makes the adjustment requested from EU countries in the event of excessive deficits a little more flexible. Concretely, it provides that States present their own adjustment trajectory in order to ensure the sustainability of their debt, giving them more time if they undertake reforms and investments.
The management would focus on the evolution of expenditure, an indicator considered more relevant than deficits which can fluctuate depending on the level of growth.
A partly distorted text
But Germany and its allies “frugal” have managed to tighten this budgetary framework by imposing a minimum quantified effort to reduce debt and deficits for all EU countries, despite the reluctance of France and Italy. These modifications have partly distorted the project and greatly complicated the text.
The EU Finance Ministers had painfully delivered a common position, just before Christmas, on this reform which intends to combine budgetary seriousness and safeguarding the investments necessary for the green transition or defense.
The indebted countries of southern Europe, like France, insisted on additional flexibilities, while the so-called countries “frugal” from northern Europe, behind Germany, demanded more rigor. “A new economic governance framework was much needed. We ensured that the new budgetary rules are sound and credible”, declared MEP Esther de Lange (EPP, right), rapporteur of the text. In the European Parliament, the project is also supported by the liberals of Renew and a large majority of the social democratic group (S&D). The Greens and certain S&D elected officials, however, reject it en bloc, as do the radical left.
These elected officials denounce a return to austerity after three years of suspension of European budgetary rules in the face of the shock of the pandemic and the war in Ukraine. “We need investments in industry, in defense, in the ecological transition, that’s the urgency today, it’s not about bringing economically absurd rules up to date”, economist and S&D MEP Aurore Lalucq told AFP. She denounces a “political error which will be used by populists to attack Europe”.
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