exclude the expenses of the Pnrr-Corriere.it

From our correspondent
BRUSSELS – Strengthen the public debt sustainability and promote one sustainable growth in all EU countries through reforms and investments to enable the green and digital transition. the challenge at the heart of the reform of the Stability and Growth Pact is the EU Commissioner for the Economy Paul Gentiloni and the vice president of the EU Commission Valdis Dombrovskis presented on Wednesday: after several postponements, the legislative texts have been finalised. The financial crisis demonstrated that the Stability Pact, as designed, had no realistic applicability. The goal is to prevent public debt reduction from leading to a contraction in investment and growth. Hence the need to reform it for have clearer, more flexible rules that can be adapted to the needs of individual countries. The Pact was suspended in March 2020 due to the economic shock caused by the spread of Covid but should be restored from January 2024. The reply from Economy Minister Giancarlo Giorgetti is clear: We take note of the commission’s proposal on the new stability pact. certainly a step forward, but we strongly asked for the exclusion of investment expenses, including those typical of the digital Pnrr and green deal, from the calculation of the target expenses on which compliance with the parameters is measured. We note that this is not the case. The minister adds: Since each investment expenditure is significant and produces debt for the new pact, it must be carefully evaluated. Therefore, only spending that actually produces a significant positive impact on GDP should be privileged.

The Commission’s proposal will have to surpass negotiation between member states and Germany, which is already on a war footing because its requests to introduce annually measurable quantitative parameters for the reduction of public debt have not been accepted, especially for the most exposed countries such as Italy. For Germany, as for other frugal countries, the Commission has too much discretion. The negotiations will only come alive in the autumn and Ecofin’s goal is to reach an agreement by the end of the year. But in addition to finding an internal agreement, it will also have to negotiate with the EU Parliament.

The reform of the Pact aims to attribute a strong national ownership in the commitment to reduce public debt with comprehensive medium-term plans, based on common EU standards. The EU countries will be called to negotiate with the EU Commission medium-term national budgetary structural plans (the equivalent of Pnrr) in which they define their own budget targetsthe measures to address macroeconomic imbalances and the reforms they priority investments for a period of at least four years which may be extended to seven years if supported by precise reforms and investments. These plans will be evaluated by the Commission and approved by the Council based on common EU criteria.

Member States will submit annual reports on the progress made. The only operational indicator for budgetary surveillance – this is a very important novelty – will be primary government expenditure, with a profound simplification of the fiscal rules. For each Member State with a deficit exceeding 3% or a public debt exceeding 60% of GDP, the Commission will publish a country adjustment plan. This technical trajectory will seek to ensure that debt is put on a plausibly downward path or that it remains at prudent levels, and that the deficit remains or is brought and maintained below 3% in the medium term.

They will apply common safeguards to ensure debt sustainability. Compared to the old Stability Pact, the Maastricht parameters of the 3% deficit ceiling and 60% public debt ceiling remain. And it stays there too rule for countries that exceed 3% annual return deficit equal to 0.5%. The ratio between public debt and GDP must be lower at the end of the period covered by the plan than at the beginning of the same period. AND even in the case of a seven-year plan, there must already be a reduction of the debt at the end of four years. Member States benefiting from an extended fiscal adjustment period will have to ensure that the fiscal effort is not deferred to recent years. In addition, the EU countries will have to maintain growth in net spending below their medium-term economic growth.

been maintained general safeguard clause (activated in March 2020) and will be activated in the event of a severe economic downturn in the EU and the Eurozone. In addition they are foreseen country-specific clauses which will make it possible to deviate from the expenditure targets in the event of exceptional circumstances beyond the control of the Member State with a significant impact on public finances. The Council, on the basis of a recommendation from the Commission, will decide on the activation and deactivation of these clauses.

There excessive deficit procedure for exceeding the 3% deficit, it remains unchanged. While the excessive deficit procedure linked to public debt is strengthened and will focus on deviations by member states from the net expenditure path to which the country has committed and which has been approved.