“This afternoon we have 100% agreement with Christian Lindner about the new rules of the Stability and Growth Pact: excellent news for Europe, which will ensure healthy public finances and investment in the future. Ecofin, tomorrow!”
With this message, the French Minister of Economy, Bruno Le Maireannounced on Tuesday night (after 10 p.m.), his agreement with his German counterpart, Christian Lindner, for the reform of the fiscal rules of the European Union, after a meeting of both in Paris, in the Ministry of Economy.
We now hear a 100% agreement with each other. @c_lindner sur les nouvelles règles du Pacte de stabilité et de croissance: excellente nouvelle pour l’Europe, qui permettra de garantir des finances publicas saines et l’investissement dans le futur 🇫🇷🇩🇪 Ecofin demain !
—Bruno Le Maire (@BrunoLeMaire) December 19, 2023
The agreement may be ratified this Wednesday by the 27 member states of the EU, at the extraordinary meeting of the European Finance Ministers (Ecofin) convened by the Spanish presidency of the EU in turn to try to push through the reform of the fiscal rules before the end of the year. The differences in criteria between France and Germany were the piece that the Spanish Presidency was missing to achieve its objective.
“I just had a productive talk with my friend Bruno Le Maire in Paris. We agree on the key elements of the tax rules: safeguards to reduce deficits and debt levels, incentives for reforms and investments. This is an opportunity to reach a political agreement in tomorrow’s Ecofin. CL,” the German Finance Minister also expressed on the social network
I just had a productive talk with my friend @BrunoLeMaire in Paris. We are in agreement on the key elements of the #EGR: Safeguards for lower deficits and debt-levels, incentives for reforms and investments. This is a chance for a political agreement at the #ECOFIN tomorrow. CL
— Christian Lindner (@c_lindner) December 19, 2023
Optimism
Before the meeting began at the French Ministry of Economy, optimism was already palpable. “I am very happy to announce that we are very close to a 100% agreement between France and Germany,” he assured. Le Maire in a joint press conference with Lindner, in which the Frenchman even promised that they were going to achieve it this Tuesday night, as he was later able to announce just four hours later.
When it assumed the rotating Presidency of the Council in June, the Spanish Government set one of its objectives as agreeing on this EU tax reform before the end of the year. And now he is close to achieving it. During the last weeks, the states of the bloc – especially France, Germany, Spain and Italy— They multiplied contacts to reach a “compromise”, despite the fact that they agree on the fundamental pillars of the reform. In fact, this will maintain the controversial rule of a maximum public deficit of 3% and a debt of 60% of GDP. Precisely, next year it will be deactivated the escape clause which has kept the application of the deficit and debt limits on hold since the start of the covid-19 pandemic, in March 2020.
Diplomatic sources also expressed this Tuesday Spain’s optimism regarding the imminence of a possible agreement this Wednesday, at the extraordinary meeting of Ecofin. While waiting to know the details of the pact between Le Maire and Lindner, to be able to unblock an agreement that was taking much longer to reach than the Spanish Presidency would have wanted, the question of what was still open on Tuesday afternoon speed should be driven the deficit to a goal of 1.5% of GDP that allows states to have a mattress to respond to moments of budgetary difficulties without violating the cap 3% of GDP. The EU economy and finance ministers must also finish closing gaps related to possible deviations from the annual spending path, reports Silvia Martínez, from Brussels.
“Technical issues that we must clarify”
France and Germany disagreed on how to make fiscal stability compatible with the purpose of maintaining investments in those countries that do not comply with deficit and debt limits. These negotiations on EU tax reform have been marked by the classic differences between Paris and Berlin, that illustrate the division between some North countries of the continent more austere and those of the south (especially, Spain, Portugal and to a lesser extent France) that prioritize maintaining the level of public spending in the face of the economic slowdown.
Before their meeting in Paris, Le Maire highlighted that the Italian Minister of Finance, Giancarlo Giorgetti, He had been aware of the progress in the talks between France and Germany and stressed that they are “aligned” with Italy. Le Maire also stressed the importance of the work of the Spanish vice president Nadia Calvino in favor of a consensus within Ecofin.
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“There is technical issues that we must clarify and we must still agree on some figures,” said the German minister in statements to the press in Bercy, headquarters of the French Ministry of Economy, at the joint press conference with Le Maire, before their meeting. Lindner He expressed, however, his confidence that they would reach a political agreement: “I am very optimistic”. “Germany will not accept rules that are not strict,” added this liberal leader, whose coalition government (composed of social democrats, greens and liberals), is currently going through a budget crisis that could force it to adopt measures contrary to the fight against climate change. , how to give up subsidize the purchase of electric cars.
The EU’s fiscal reform “will allow for the first time since the creation of the euro to have a true stability and growth pact, which is not just a stability pact,” highlighted Le Maire. Although this measure will not modify the deficit and debt ceilings, it is intended to make them easier to apply. Over the past few decades, many EU countries – including France and Germany – have had great difficulty respecting these rules.