MEPs approve reform of EU budget rules

The text was subject to bitter negotiations for more than two years. Members of the European Parliament meeting in plenary session in Strasbourg voted on Tuesday to reform EU budget rules to ensure member states’ public finances are restored while investment is maintained. Left-leaning elected officials view the text as a tool to set austerity policies in Europe. But he won broad support from the three main political groups: the conservative EPP, the Social Democrats (S&D) and the liberals (Renew).

The new rules are “more flexible, more reliable in their application” and will “allow a gradual reduction of public debt without compromising economic growth,” European Commissioner for the Economy Paolo Gentiloni confirmed during a debate just before the vote. Agreement on this reform was reached on February 10 between negotiators from MEPs and EU member states. The text will be used this year by finance ministers in twenty-seven countries as they prepare their 2025 budgets.

The reform aims to modernize the Stability Pact, created in the late 1990s, which limits the general government deficit to 3% of GDP and debt to 60% for each country. This structure, considered too strict, was never truly followed and was considered outdated.

By reaffirming these symbolic relationships, the new text makes a little more flexible the adjustment required of EU countries in the event of excessive deficits if they agree to investment and structural reforms. First of all, the efforts will be tailored to their individual situation. Specifically, it stipulates that states will present development trajectories over four or seven years to ensure the sustainability of their debt. Management will focus on spending trends, an indicator considered more important than the deficit, which can fluctuate with the level of economic growth.

“Straitjacket”

But Germany and its “frugal” allies achieved minimal quantitative efforts to reduce debt and deficits for all countries with excessive deficits, despite opposition from France and Italy. These changes, in order to tighten them, partially distorted and greatly complicated the text.

Just before Christmas, EU finance ministers struggled to come up with a common position on the reform, which aims to combine fiscal seriousness and protection of investments needed for the transition to a green economy or defense. This is the result of a balance between the position of the debtor countries of southern Europe, such as France, which insisted on additional flexibilities, and the so-called “frugal” northern European countries behind Germany, which demanded greater rigor.

“This reform represents both a new turn and a return to fiscal responsibility. The old rules had many weaknesses and shortcomings, they were practically not applied,” said German conservative MEP Markus Ferber. “We have ensured a strong social footprint with the new rules,” said Portuguese Socialist MEP Margarida Marques, a co-rapporteur of the text.

However, the Greens and some S&D elected officials reject it outright, as do the radical left. They condemn a return to austerity policies that will slow investment and benefit populists, after three years of suspended European fiscal rules in the face of the twin shocks of the pandemic and the war in Ukraine.

The new “unfair and deadly” rules will “impose a straitjacket on all European states” and “create conditions for political impotence,” warned Belgian environmentalist and MEP Philippe Lamberts. The agreement “will require member states to reduce their debt quickly and in a way that is not economically and socially sustainable: it would mean a return to austerity policies,” the Spanish, Belgian, French, Italian and Italian trade unions openly decided on Monday. letter.