After months of negotiations, European Union finance ministers reached an agreement on Wednesday on new budget rules for member states. This was announced by the Spanish Presidency of the Council. Countries with debt above 90% of GDP, such as Belgium, will have to reduce it by an average of one percentage point per year.
During their meeting on 8 December, the finance ministers of the 27 member states were on the verge of reaching an agreement, but today they finally succeeded. The French and German ministers, Bruno Le Maire and Christian Lindner, had already indicated on Tuesday evening that an agreement was in the works. The agreement they reached then formed the basis for the agreement which has now been approved by all 27 member states.
A review of European fiscal rules should give EU countries a more detailed path to the evolution of their net primary spending, leading to a reduction in their debt ratios. This process initially lasts four years, but can be extended to seven years. The reference values for the maximum debt ratio of 60 percent and the maximum deficit of 3 percent will not be affected, and these thresholds will still need to be achieved.
It was agreed that countries whose debt ratio exceeds 90 percent of GDP will have to reduce it by an average of one percentage point per year. Countries with debt ratios between 60 and 90 percent are expected to make an annual effort of 0.5 percentage points.
Reforming budget rules serves a dual purpose. On the one hand, member states should have a greater role in their budget processes, and on the other hand, the new rules should be more enforceable than the old rules, which have been suspended since the outbreak of the Corona crisis. Germany stressed the need for strict rules and was reached during the negotiations that the budget deficit should not be reduced to 3 percent of GDP, but to 1.5 percent, in order to maintain a margin of safety up to the “official” upper limit of 3 percent. In Germany. The Stability and Growth Pact has been redesigned.
France led the group of countries that demanded adequate space for investments. A balance has finally been found between the demands of Berlin and Paris. “Public investments in European policy priorities such as the green transition, digital transition, social policy and defense will be protected,” Spanish Minister Nadia Calviño said on Wednesday evening after the meeting. She led the negotiations.
European Commissioner Valdis Dombrovskis also expressed his satisfaction. He said member states would have more flexibility in their budget policies, but the Commission would now be able to enforce the rules more easily. He hopes the budget rules will finally be adopted before next spring’s elections, so the commission can then apply them in its opinions for the 2025 fiscal year.
Wednesday’s agreement is not the end of the road. In recent months, the focus has been on negotiations within the Council (member states), but the European Parliament is also taking a decision on one of the three relevant draft laws. The Council and Parliament must now negotiate the final text. At committee level, Parliament has already established a position closely aligned with that of the Member States.
For Spanish Minister Calviño, the agreement is the culmination of her presidency of the Council of Ministers. She is now leaving politics to become the new president of the European Investment Bank (EIB) on January 1. Negotiations with Parliament after the new year will be led by Belgian Minister Vincent Van Petegem (Cd&V).
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