All safe, but not for long. Yesterday, presenting the spring economic package, the European Commission decided not to open any excessive deficit procedure with EU countries, confirming for the whole of 2022 the suspension of the Stability and Growth Pact, whose rules on the discipline of public accounts (deficit below 3% and debt / GDP ratio at 60%) will return to apply from 2023.
The public anti-crisis measures to support economies have left heavy traces – 23 countries exceed the parameters on the deficit criterion, 13 do not respect the debt criterion – but within the framework of the macroeconomic policy recommendations of the European Semester, Brussels invites governments not to to withdraw them too quickly: «The recovery is underway. A gloomy winter is giving way to a bright spring for the European economy. It would be wrong now that the recovery is gaining momentum to tighten the conditions of support for the economy, repeating the mistakes that unfortunately were made during the previous crisis », said the Commissioner for Economic Affairs Paolo Gentiloni. States with high debt, however, should pursue a prudent budgetary policy and “limit the growth of current expenditure financed at the national level” by concentrating it instead “on reforms and investments”, added the former prime minister, because “one thing is if public finances are used for current expenditure; another if for investments in research, education and public infrastructures ».
Italy ends up on the dock (close to 160% debt on GDP), which together with Greece and Cyprus, according to the EU executive, has excessive macroeconomic imbalances linked to the high level of public debt, in a context of fragility labor market and banking sectors, which are likely to increase once the support measures are withdrawn. Brussels recommends Italy to “use the Recovery Plan funds to finance additional investments to support the recovery, while conducting prudent budgetary policies”; but already next year, the policies of the EU states “should gradually differentiate” and, when conditions permit, it will have to “return to ensuring sustainability in the medium term”.
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In any case, the Commission will continue to monitor the public finances of the Member States in the coming months of the suspension of the Stability Pact, but – announces the EU executive – it will do so with respect to qualitative rather than quantitative parameters.
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Waiting for the reform of the rules on budgetary discipline: the reflection – delayed by the explosion of the pandemic – will begin in the second half of the year, when Brussels will present proposals for the modification of the Pact. “But it won’t be easy,” Gentiloni warned. And the battle is also internal to the Commission. “The current fiscal framework already provides enough flexibility, at the regulatory level, to ensure that the right balance is struck between the financing of the recovery and the sustainability of public resources,” commented Commission Executive Vice-President Valdis Dombrovskis, among the main hawks of Berlaymont palace.
To give him a hand, from a distance, was a leading name in the field of austerity proponents: the former German finance minister Wolfgang Schauble – now president of the Bundestag, the Berlin Chamber -, who in the same hours entrusted to an editorial in the Financial Times an appeal for the return of fiscal discipline in Europe, to avoid the risks of “a moral hazard of which I have spoken on several occasions also with Mario Draghi”. Germany is precisely the special observation in view of the start of the discussion on the revision of the rules of the Stability Pact: on September 26, the era of Angela Merkel will close, after 16 years, and an advent of the Greens in power could reposition also Berlin together with Italy, France, Spain and Greece in favor of a change of pace.
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