One of the planned milestones of the six-month period of the Spanish presidency of the EU is the agreement on future fiscal rules. It has not been achieved so far, despite the clear will of the acting Spanish Government to do so before the end of the semester. It is advisable to leave behind four years of fiscal relaxation, since 2020 with the pandemic. And have a roadmap for the public finances of the EU countries. Reaching a consensus is difficult due to the different visions in the Old Continent. As often happens, Germany – and the central and northern countries – on the one hand, and, on the other hand, France and Italy – and other southern countries – maintain different positions, with resistance to changing them.
The first group advocates for a clear rule, with annual commitments to reduce public debt. The second aims to ensure that there are no automatic reductions in this debt without first considering the economic circumstances or the phase of the cycle in which the countries find themselves. From the experience of the global financial crisis, it seems appropriate to have considerations beyond an automatic rule that entails cuts and inconvenient decisions in the medium term. A Danish proposal to calculate debt reductions as an average over a given period appears to have brought the positions closer.
The objective is to clean up public finances and, at the same time, promote sustainability and digitalization strategies. This requires generating confidence for investments. It requires credibility and flexibility for the new framework, leaving behind the abundant compliance problems of the previous Growth Stability Pact. We cannot forget the harsh impact of the rise in interest rates on debt, putting more pressure and urgency in the design of the new rules. Trust between Europeans – which has been lost in fiscal matters too often in the last two decades – is a central pillar of the future of the EU, its strengthening and common policies.
An early agreement is desirable. After all, it is an “operational” measure that coexists with the great geopolitical challenges of the medium-term bloc that require full attention. From the consequences of the current war conflicts – which will force the EU to dedicate many more resources to the defense and support of other countries – to the energy transition, which requires abundant funds and a lot of gray matter so that it is not a ballast for the European economy. In addition to the possible enlargement of the EU and the steps – even if they are gradual and slow – towards a greater Political Union.
In short, the fiscal rules agreed upon must be credible and not rigid. And come accompanied by reform policies that increase productivity and competitiveness and growth that alleviates the burden of public debt. Perhaps this is why the European Commission has commissioned none other than Mario Draghi to produce a report on the state of competitiveness and the strategies to follow.
