Germany and France conspire to finalize numerical details of fiscal rules this month

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In October, the Franco-German axis took control of the negotiation of European fiscal rules and in November it intends to finalize the pending details, the numbers that are missing to define the debt or deficit reduction objectives and seal the expected agreement. On paper, it is up to the Spanish president to take the reins of the negotiation, and she is the vice president. Nadia Calvino the one who speaks with all the parties, the one in charge of drafting the documents and the one who must present a legal text in the coming weeks, but in practice now the solution involves Berlin and Paris.

It is common for the two great powers to assume responsibilities in the most complicated matters, and the framework for the economic governance of the Eurozone is undoubtedly one of them. But also in this case the governments of Olaf Scholz and Emmanuel Macron They are also on opposite fronts. Germany is the most combative country on the orthodox side, which has demanded and is achieving that in the final text there are concrete numerical references for the objectives of structural efforts, debt and deficit reduction, something that was not even in the spirit of the reform promoted by the European Commission nor in the plans of the Spanish presidency. And France represents, at least in part, those like her, Italy and others in the south who advocate taking advantage of the moment to avoid repeating past mistakes, developing a different and more modern framework that has more impact on growth and employment and less in fiscal corsets.

In summer, Spain presented a series of four blocks to move forward with a view to closing the matter before the end of the year, because on January 1, 2024, if this reform is not achieved, the Stability and Growth Pact that was left in an induced coma with the arrival of the pandemic will come into force again. These four pillars are an institutional balance, common objectives, fiscal space for investments and reforms and credible implementation and national ownership, so that Member States have a greater role in designing adjustment paths.

Progress has been made in almost all of them, but the most difficult thing remained, the so-called numeric benchmarks, the obsession of Minister Lindner, who says that personalized paths are very good, investments are very necessary and that new rules are needed, but that the annual reduction of the deficit, the reduction of debt and the establishment of margins or buffers for all countries, regardless of their situation, so that the threshold of the Stability Pact (3% and 60%) is a maximum and not a minimum. That is, even those who are comfortable and do not have imbalances have to make annual efforts to move away from 3%. What is now on the table is when and when. And that’s why they will meet in Berlin, no matter how much Calviño wants to maintain control and has called, for the end of this month, an extraordinary Ecofin in which, now, he has promised that there will be a legal text to finalize.

“A Franco-German initiative could lead to mutual understanding between all Member States. That is why I went to Paris this week and we found common ground on debt safeguards and the deficit benchmark, a substantial step forward that has been recognized in the Ecofin table and in the new landing zone“said the German minister this Thursday in Brussels, in reference to the technical document distributed by the Spanish presidency to find a “landing zone satisfactory for all.

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