With the city of Santiago de Compostela as the monumental setting for one of the most momentous decisions that the European Union will have to make this year, the new fiscal rules of the euro zone, the Spanish presidency proposed in September to close a first agreement at the meeting of ministers in October. With just a few days left until the appointment, the Spanish Government has encountered, however, the same thing that many pilgrims experience, the reality that the goal, the final destination, is further away than it seemed.
The latest compromise proposal presented by the team of the Vice-President of the Central Government and Acting Minister of the Economy, Nadia Calviño, has not elicited the expected consensus among the Twenty-Seven, which remain divided into two large blocs. On the one hand, the one led by France and Italy, who ask that the application of the rules be made more flexible and that governments be given room to invest in the energy transition and be able to compete with China or the USA. And, on the other, Germany, which rejects the discretion of the system put forward by Brussels in which each country will receive a tailor-made deficit and debt reduction path, a position that has the support of around 13 countries.
The distance between both positions, several European diplomatic sources explain, is too wide to try to reach a principle of agreement or general orientation at the meeting of European Ministers of Economy that will take place on Tuesday in Luxembourg. The Spanish presidency has not yet revealed whether it will present a new proposal to the capitals before the meeting, but, in any case, the matter only appears as a topic to be debated during lunch.
Although points of agreement are starting to be glimpsed, for example on the possibility of excluding certain items from the calculation, such as defense spending, differences persist on key issues such as debt reduction benchmarks. Berlin has toughened its position and warns of the risk that the markets will go back to the euro if the new version of the stability pact does not have enough credibility.
"We need credible fiscal rules for the financial markets", warned the German Minister of Finance, the liberal Christian Lindner, yesterday. "The stability of our economy is at stake," he said on the sidelines of the International Monetary Fund meeting in Morocco. "A bad agreement would not be a good sign for the markets", added for his part the president of the Bundesbank, Joachim Nagel. "I don't want to speculate on how the markets would react if there is no agreement".
The EU suspended the application of the stability pact at the beginning of the pandemic and then because of the war in Ukraine, but from January 1, 2024 the European Commission must apply it again, reformed or not The goal remains to reach an agreement this year. The negotiation to elect the new president of the European Investment Bank, a position for which Calviño is a candidate, has also stalled. Neither the Spaniard nor her main rival, the Danish Margrethe Vestager, have enough votes to win the position. Berlin's indeterminacy (Chancellor Olaf Scholz supports the Spanish one, and Minister Lindner, the Nordic Liberal) contributes to keeping the process blocked, which cannot be ruled out to be reset to start from scratch in the hope that one of the five candidates withdraw.
