Ecofin, the game of rules on public finances. Pressing by Gentiloni: “We need progress quickly”. Germany: “Flexibility, but debt reductions are credible”

In the aftermath of Commissioner Paolo Gentiloni’s call on the real challenge for the Pnrr which is “making investments” and not so much “the amount of funds available”, another message arrives from European leaders to seafarers. Speaking of the revision of the rules on the budget of the member countries, the German Finance Minister Christian Lindner he dictated the line arriving at Ecofin: “It is our responsibility for the younger generations to have sustainable public finances again”. And again: “For the Germany a return to sound and sustainable public finances as soon as possible is essential. We are open to more flexibility in a medium-term perspective but we need a reliable path to deficit reduction within the European Union.”

The open game is that of the revision of the Stability Pact, which risks reopening the rift between the North and South of the continent: on the one hand, those who ask to file without appeal the austerity phase suspended for the Covid emergency first and Ukraine after; and on the other hand those who want to return to the discipline of public finances. Next year the suspension of the rules will be lifted: finding a new balance between support for important industrial phenomena such as the green transition and reducing public debt is not easy. The elimination of the clause to reduce the debt by one twentieth a year, in the event that it exceeds 60% of GDP, for the Nordics risks giving too much carte blanche to countries that have not demonstrated sufficient discipline. On the other hand, everyone is aware that faced with a plan like the American one (Inflation reduction act) that supports businesses with fresh 370 billion, there is the risk of losing the battle from global competitiveness.

Already at the Eurogroup on Monday the line of theHolland. In revising the rules of the EU’s Stability and Growth Pact “we need the carrot and the stick. I think most countries agree”, he said Sigrid Kaag, Dutch Deputy Prime Minister. “It’s very important that there is room for debt relief” and “room for investment and reform,” he said. “It’s extremely important to approach everything in a balanced way.” Kaag also ruled out the possibility of having a new extension of the safeguard clause that suspends the Pact: “It is not feasible and it is not desirable”. The debt reductions of the most indebted countries “must be measurable. The metrics must be clear, there must be transparency and there must be supervision in case countries deviate and deviate or transgress without a reason”.

The same Gentiloni calls for a balance: “The time for the revision of the budgetary rules is not unlimited, progress must be made to be able to reach conclusions in March also to allow the European Parliament to pronounce itself on the legislation”, his words before the Ecofin . Gentiloni added that there are some basic elements of consensus on which to build an agreement: a more gradual reduction of the debt, taking into account the need to strengthen growth with public investments; strike a balance between national fiscal programs and the common reference framework (essentially the freedom to maneuver at the national level given the European constraints on financial sustainability). The commissioner acknowledged that “a solution is not easy to reach, but I don’t see a clash, I see different positions on the field, legitimate positions, I see awareness” that an agreement must be found.

“I am confident that we will be able to find a compromise and we will be able to carry on” the discussion on the revision of the EU’s Stability and Growth Pact, said the vice president of the European Commission instead Valdis Dombrovskis. “The intention is to finalize the discussions in March” in the Council so that the Commission will then present a legislative proposal “at the end of March or perhaps the first half of April. The follow-up will depend on how quickly the co-legislators decide”.