France and Germany resolve their differences and clear the way for an agreement on EU tax rules

The EU Economy and Finance Ministers will approve this Wednesday the reform of economic governance so that the new fiscal rules can come into force in 2024. After a year of discussions, six months of negotiations under the Spanish presidency and not having been able to iron out all the differences in meetings in Brussels, Santiago de Compostela or Luxembourg, the 27 are practically ready. This was confirmed this Tuesday by the Frenchman Bruno Le Maire and the German Christian Lindner, who a few weeks ago, faced with the impasse that prevented the unlocking, decided to take the lead bilaterally, as has historically been done in the EU on the most important issues. divisive.

Although some countries could show reservations tomorrow, the main officials believe that we are already in the last kilometer and that there will be no surprises, so negotiations with the European Parliament could begin in a matter of days so that the new regulation is in force in the first quarter of next year.

“We are very close to a 100% agreement between France and Germany on the new rules. We have worked hard and I am sure we will achieve 100% tonight. For the first time since the creation of the euro we will have a true Stability and Growth Pact, not only the first, but also the second. Something that guarantees that the debt and the deficit are reduced, but that also promotes growth, because we are at a moment in history when we need to invest for decarbonization and to guarantee our security.. A 100% agreement should be ready tonight, it is excellent news for everyone,” said Le Maire, who has invited his colleague to Paris tonight to finalize the pending details on the so-called preventive arm.. That is, the necessary fiscal effort measures for countries that are below a 3% deficit, but have to continue working to generate a cushion..

France wanted flexibility and mechanisms that guarantee that in the coming years it will be able to continue spending on continental priorities, and it remains to know what numbers to put in concrete. Community sources explain that since the ministers will meet by videoconference, the topics that will be discussed have been reduced to a minimum.. Right now, in the texts that the Spanish presidency distributed 24 hours ago, there are only two aspects left in square brackets, that is, to be defined. The first, how much countries can deviate from the annual spending rule, which is the axis of the new fiscal rules. The previous Spanish proposal was from 0.25 to 0.50 a year or from 0.50 to 0.75 in total and the ministers will have to agree, once the Franco-German axis is aligned.

The second point is the speed to achieve that fiscal cushion of 1.5% that has been established at the request of Berlin for countries that, even though they are below a 3% deficit, have to continue reducing each year until the deficit is 1 .5%, so that if an unexpected shock arrives, the automatic stabilizers do not trigger imbalances above 3%. France is the one that most requested that there be a certain margin, and that the adjustment not be 0.5% per year, as the traditional rules say, but that it could be slower to reserve a certain margin of flexibility for investments, especially in the next few years. 4 years

“If the new rules were not strict, Germany would not agree. Strict understood as credible, sufficient and efficient to lead us to debt reduction and credible deficit reduction paths. This is what we have put in place is that landing zone, allowing investments and maintaining space for necessary reforms.. Now the rules will be credible. The previous ones were on paper, but not in reality, no,” said the German liberal in a statement to the media..

“In order to reach an agreement on the German and French proposals and then be able to convince others of them, today we have already had a conversation with our Italian colleague Giancarlo Georgietti and I am therefore sure that tomorrow we will reach a political agreement in the extraordinary Ecofin meeting,” added the German about the meeting that will be held this Wednesday afternoon by videoconference, after almost all the details have been polished in the last two weeks by the technical teams..

Something relevant because Italy has been very critical, both with the substance and with the fact that the meeting is by videoconference, trying to ensure that no more aspects are reopened.. The Spanish presidency has not had much margin, since for calendar reasons several delegations said that they would not be able to travel in person, and no one wanted to postpone this to 2024, with another presidency. “It's all or nothing, we want the pressure to be felt and everything to be resolved now,” say diplomatic sources..

“It is important for Germany at all times to maintain the culture of stability in Europe. Fiscal resilience is preparation for crises and what will allow us to react to the unforeseen,” said Lindner, who has achieved almost all of his initial demands during this negotiation, by imposing mandatory debt and deficit reductions each year for countries. with more imbalances, but also an additional effort for those who comply with the rules will have to continue rowing to go down to a deficit of 1.5 or 2% and not the 3% that the Pact stipulates as the maximum threshold.