EU continues negotiations on fiscal rules, but still ‘very far’ from an agreement

European Union (EU) finance ministers, meeting at an informal dinner in Brussels this evening, continue to discuss reform of fiscal rules with debt and deficit limits but are still “very far away” from an agreement.

Several European sources close to the talks, which are taking place behind closed doors at the informal meeting, provided information to Lusa, indicating that “discussions are still ongoing and positions are still far apart.”

Organized by the Spanish Presidency of the Council of the EU, this open-ended informal dinner aims to reach consensus among the finance ministers of the 27 Member States on economic governance reform, based on the Spanish proposal, which would reduce the minimum average debt by at least 1 % per year for countries with a debt ratio above 90% of gross domestic product (GDP) and by 0.5% for countries between this level and the ceiling of 60% of GDP.

The Spanish proposal also defends the target of reducing the deficit to 1.5% as a safety margin, even if the government account deficit falls below the 3% of GDP ceiling.

The demands have been put forward by a group of “lean” countries led by Germany, which has always called for quantitative measures in the fight against debt, but is opposed by countries such as Italy, which are demanding more flexibility, according to European sources.

France, for its part, allows structural adjustment to be reduced from 0.5% of GDP to 0.3% for countries that are committed to investment and reform, but the Paris proposal is not well received by Berlin, according to the same sources.

Thus, negotiations are complicated by “the flexibility of the system: some want more, others want less,” community sources say.

However, the intention of the Spanish Presidency of the Council of the EU is for an agreement to be reached on this issue this evening, which could also be reached at the next Ecofin meeting on Friday.

But Finance Minister Fernando Medina said this afternoon that “more steps are needed” to reach an EU agreement on new fiscal rules, admitting there was no consensus yet.

What is certain is that, given the European elections in June 2024, this file should already be “closed”, given the necessary time for negotiations between legislators (Council and European Parliament).

The debate comes as those fiscal rules are expected to be resumed next year, after being suspended due to the pandemic and war in Ukraine, with new wording despite the usual ceilings of 60% of GDP for public debt and 3% of GDP for public debt . deficit.

Portugal advocates introducing a counter-cyclical nature of this reform, so that in times of higher economic growth, countries make greater efforts to reduce public debt and, instead, have a slower pace of reduction in times of more subdued GDP.

The discussion builds on the European Commission’s proposal, published last April, for risk-based fiscal rules with a technical and personalized trajectory for EU debtor countries such as Portugal, giving them more time to reduce deficits and debt.