Brussels proposes paths according to debt by country but requires a minimum annual deficit adjustment of 0.5% of GDP

BRUSSELS, 26 Apr. (EUROPE PRESS) -

The European Commission has presented this Wednesday its proposal to review the fiscal rules, which contemplates a path of spending subject to the debt by country, but with a minimum annual adjustment of the deficit of 0.5% of GDP for the years in which The negative general government imbalance is expected to exceed the 3% benchmark, a common parameter that has been introduced at the request of countries such as Germany.

In addition, it will be the governments of each Member State that will have to present their own medium-term fiscal adjustment plans based on a reduction in the "plausible" spending path that allows debt to be maintained at "prudent" levels over a period of time. period of four years, although it may be extended to a maximum of seven if it is supported by reforms and specific investments.

For its part, the Commission will provide technical trajectories showing what fiscal adjustment is necessary to ensure that the criteria of the 3% and 60% reference values ​​are met, but it will be the 27 who will have to support the structural plans presented by each country , as well as the reform and investment commitments on which the extensions are based.

As highlighted at a press conference by the Commission's economic vice-president, Valdis Dombrovskis, this approach responds to a "balanced approach designed around key areas to guarantee transparency and equal treatment" which, in addition, "allows debt to be reduced while encouraging investment and reform.

"Our proposals simplify our rules and focus on fiscal challenges. This means taking into account the different initial budgetary situations of the Member States and their different challenges in terms of public debt", explained, for his part, the European Commissioner for Economy, Paolo Gentiloni, who has stressed that, by focusing on spending, "the typical procyclical bias that fiscal policy has had in recent years" is also avoided.

The proposal also maintains some of the obligations of the current discipline, such as the Excessive Deficit Procedure (EDP), which continues at a maximum of 3%, while the one based on debt, which is activated when a Member State reaches a debt of more than 60% of GDP, it will be reinforced.

Likewise, the revision introduces a specific escape clause for Member States that contemplates the possibility of extraordinary events, such as pandemics or wars, derived from the context after the pandemic and the crisis caused by Russia's attack on Ukraine.

However, while the proposals provide Member States with greater control over the design of their medium-term plans, they also set out a stricter implementation regime to ensure that they meet the commitments they make in their medium-term plans.

In the case of Member States facing significant challenges in terms of public debt, deviations from the agreed fiscal adjustment path will lead by default to the opening of an excessive deficit procedure.

If reform and investment commitments justifying an extension of the budget adjustment period are not met, the adjustment period could be extended, but failure to meet reform and investment commitments justifying an extension of the budget adjustment period could result in reducing this period.

The objective of Brussels is to conclude the legislative work this year to begin preparations throughout 2024, with the development of national debt reduction plans so that they cover the period from 2025.