ANP
NOS Nieuws•vandaag, 19:54
The EU countries have finally reached an agreement on the major reform and renewal of the European budget rules. The tight straitjacket of budget and debts can be loosened and there will be more customization. On the other hand, these budgetary rules must be enforced. Until today, the finance ministers of the 27 EU member states have been negotiating intensively on the renewal of the budget rules.
The basic rules of the European budget system have changed slightly. Countries now have to limit their budget deficit to 3 percent of gross domestic product. But the goal will soon be to reduce the deficit to 1.5 percent of GDP. Countries must still keep their national debt below 60 percent. However, the new rules give them more room to reduce their use more slowly.
The change lies in the term and the conditions for meeting those requirements if the deficits or debts are too high. From now on, EU countries with a national debt exceeding 90 percent of GDP must reduce their debt by an average of 1 percent annually for four to seven years. EU countries with a debt ratio of between 60 and 90 percent of GDP must reduce this by an average of half a percent annually, also in four to seven years.
Flexibility
“It is important that a solid foundation is laid for national budgets with clear rules and that everyone adheres to them. This is in the common interest of all EU member states,” said outgoing Finance Minister Kaag. “With this agreement, we get budget rules that encourage reforms, with room for the right investments and tailored to the situation a country finds itself in. The new system works counter-cyclically so that potential economic growth is not smothered. In addition, rules must also be improved complied with, because that was too often a problem.”
The new budget rules should give countries more flexibility to make the necessary investments in the coming years to make their economies more sustainable and digital. A major concern of countries with high public debt such as Italy and Greece was that strict fiscal rules would prevent them from investing. In the future, countries must therefore also submit plans to the Commission showing how they will put their public finances in order and continue to boost their economies.
An eyesore
For years, the 27 EU countries have been struggling with the European budget rules from the so-called Stability Pact, which dates from the 1990s. The old rules assume a strict path for countries that do not meet the criteria for the budget deficit and the government debt ratio.
When the national debt rose above 60 percent, countries had to make significant cuts: 5 percent per year. This appears to be especially painful for Southern European countries such as Greece, Italy and Portugal, which suffer from high government debts. They sometimes had to cut their economy to pieces. France is also struggling with the rigid budget rules.
On the other hand, it has been a thorn in the side of the Netherlands and Germany for years that countries that do not adhere to the budget rules are not reprimanded by Brussels. The compromise now is that the rules are more flexible, but countries that do not adhere to them are punished.
At the moment, the budget rules are not being enforced. Due to the large expenditure that countries had to incur due to the corona pandemic, it was decided that the Commission would turn a blind eye. But they will stop doing this from January and then the old rules would apply again. The Spanish Presidency was therefore determined that the countries should reach an agreement before the end of the year. An agreement was also more than desirable under pressure from the upcoming European elections to be held in June.
The majority of the European Parliament has already agreed on what the new European budget rules should look like. Last Monday, the European Parliament’s Economics Committee supported a report on reform of the budget rules, which broadly corresponds to the agreement now concluded.
The intention is that the EU countries and the European Parliament will negotiate the new budget rules with each other in January. Once they are out, new budget rules will be a fact. The Commission hopes that these negotiations will not take very long. The intention is for the budget rules to come into effect in June next year.
2023-12-20 18:54:37
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