The president of the European Central Bank, Christine Lagarde, yesterday sent an urgent message to the leaders of the Twenty-seven. Geopolitical risks, the fall in growth, the need to make investments to maintain competitiveness... In economic terms, Lagarde stressed, everything is pushing the countries of the European Union in one direction: the urgent update of the common fiscal rules .
"The European fiscal framework must promote both debt sustainability and the investments necessary to maintain competitiveness and resilience. Finding an agreement on the future application of the stability and growth pact before the end of the year would be important for unity", the president of the ECB asked the leaders during the euro summit held in Brussels. A no-deal scenario could cause problems for markets, Lagarde warned them, according to European sources.
The conclusions of the European Council call on the Ministers of the Economy to "continue the work" of the reform of economic governance "with a view to reaching an agreement before the end of the year 2023". From the text, however, the call to do so "without delay" has been dropped, a change that Frankfurt observes with concern, as well as the fact that the summit barely devoted time to the issue and neither did the German Chancellor, Olaf Scholz , nor did the French president, Emmanuel Macron, intervene.
The Spanish presidency of the Council does not foresee the possibility of not reaching an agreement this year (the acting Prime Minister, Pedro Sánchez, said yesterday that he will get involved "personally" if necessary to achieve it), but weeks that Berlin says that if it is not achieved, the old rules would simply come into force. This attitude, added to the frontal rejection of the German Ministry of Finance to the model proposed by the European Commission, with debt reduction plans tailored to the situation of each country and a wide margin to decide the pace of fiscal consolidation, is contributing to the fact that the debate moves clearly towards the German positions.
All the current proposals, coming from Germany, Spain or Denmark, foresee different ways of imposing mandatory reductions; the principle is no longer questioned, the difference is in how it is quantified. "Southern countries will be able to say that the new pact is smarter, more open and allows reforms and investments to be taken into account", and those in the north, for their part, that "contains debt control mechanisms more automatic than before", diplomatic sources summarize.
But "we are moving towards a more structural system of debt reduction", they add. To the old well-known file for excessive deficit will now be added the possibility that countries will be filed for not reducing the debt sufficiently each year based on the public expenditure figure.
After the failed attempt to reach an agreement in October, several delegations had the feeling that the Spanish presidency had "lifted its foot off the pedal", but the negotiations are back on track for the December meeting , point out from the Commission. The alternative to an agreement is the return not to the original stability pact, but to the one that was reformed under the cover of the euro crisis, which imposes the annual cut of one-twentieth of the debt greater than one 60%, a tougher system than the alternative on the table.
