EU countries reach agreement on new debt and deficit rules

This Wednesday, the Ministers of Economy and Finance of the European Union reached a political agreement on the new deficit and debt control rules, which will give countries greater control over their pace of adjustment but also include minimum requirements for fiscal discipline. .

The pact, sealed during a videoconference meeting, was possible after Germany and France reached an agreement yesterday on the main lines of the reform of the Stability and Growth Pact and allows Spain to meet one of the great objectives it had set for itself. for his presidency of the Council of the EU.

“The agreement on fiscal rules is important and positive news; it will give certainty to the financial markets and will reinforce confidence in European economies,” said the vice president and minister of Economy, Commerce and Business, Nadia Calviño, who has led the negotiations.

After months of discussions, the Twenty-Seven managed to bridge the differences between the partners who, such as Germany, Austria or the Nordics, emphasized that the rules guarantee fiscal discipline and those who, led by France and Italy, demanded that they leave more room for invest in priority areas, such as defense or ecological transition.

The new rules will maintain the limits of 3% and 60% of GDP on the deficit and debt, respectively, but will introduce individual four-year fiscal paths for each Member State, thus taking more into account the situation of each country than the previous ones.

This period can be extended to seven years if the countries commit to carrying out reforms and investments agreed with the European Commission and will be based on a new indicator: net primary spending, which excludes the disbursement of debt interest, among other issues.

However, at the request of Germany, common objectives have been introduced for all States in order to avoid postponing adjustments.

Specifically, countries whose debt exceeds 90% of GDP will have to cut it by 1 percentage point on average each year and those with a ratio between 60% and 90%, by 0.5 points, while those with a deficit below 3% of GDP must continue to reduce it to 1.5% in order to create a cushion for difficult times.

“The new tax rules for EU Member States are more realistic and effective at the same time. “They combine clear figures for increasingly lower deficits and debt ratios with incentives for investments and structural reforms,” celebrated German Finance Minister Christian Lindner on the social network X.

Precisely, the biggest point of disagreement until the end has been the pace of adjustment of the deficit, a point that has traditionally confronted the partners in the Paris and Berlin orbit, as well as the level of non-compliance with the spending path that will allow The European Commission will open a file.

Italy and France wanted to exclude debt interest in the calculation of the deficit adjustment, which automatically softens the cut, but it has finally been agreed that this will be taken into account only until 2027 given the high interest rate environment expected in these years.. Furthermore, when the deficit does not exceed 3%, the annual adjustment may be reduced if investments are made.

The agreement still has to be formally approved by the ambassadors of the Twenty-seven to the EU, after which negotiations can begin with the European Parliament to agree on the final texts so that the new rules come into force in 2025.