The hands move inexorably, but a agreement on the Stability Pact it still seems far away despite the progress made over the last one Ecofin. And while France and Germany work together to find a common path towards reform and Spain - current President - continues to propose compromise measures that can satisfy both the discontent of the rigorists and those of the most exposed states, our country limits itself to building a wall and, as Repubblica reports, many in Europe say: "It is no longer clear what Italy wants", which among other things is also blocking the entry into force of the ESM, having remained the only country that has not yet had it ratified.
The end of the year is just over a month and a half away and if in this period it is not possible to find a solution on the new Stability Pact, on January 1, 2024 the old one will come into force, suspended in 2020 due to pandemic. And they will be painful for everyone, especially for us. The return of the old Pact for Italy would in fact be almost a catastrophe, both from an economic and financial point of view with the markets reacting badly and hitting our country again. Without us, however, it is not possible to approve even the new one, given that one of the three different regulations that make up the reform must be approved unanimously and it would be unthinkable to give the green light to a reform of this magnitude without our approval. of one of the most important Member States.
The European short circuit is served, with Rome which seems more and more isolated and Germany and France pulling the strings of the new European structure without involving us. The attempt, among other things, also took place through a meeting between the Minister of Economy Giancarlo Giorgetti and his French counterpart Bruno Le Maire, but the two were unable to build a common position despite partly sharing the same problems.
In this context, despite all the difficulties, optimism shines from the leaders. Negotiations continue and another extraordinary Ecofin has already been announced for November 23rd with the aim of closing the issue by December 8th.
“There is still a lot of work to do in the last mile we have to walk, but like in the Camino de Santiago we begin to glimpse the cathedral”, said Spain's Calviño.
The latest news on the Stability Pact
At a general level, the reform establishes that each Member State builds a recovery plan of debt based on net government spending. The plans will last four years which will become seven if the country carries out investments and reforms. After the agreed period, the debt/GDP ratio must be lower than the initial one.
Spain would like to immediately move on to the translation into legal texts of the "landing zone" presented on Thursday, i.e. the document that establishes the key points of the reform such as debt and deficit safeguards, but for now the negotiations continue. '”We have put compromise proposals on the table (landing zone, ed.) that reflect the contributions of all states. It is the result of intense exchanges and the word with which we can best summarize this work is balanced”, explained Calvino in the press conference at the end of the Ecofin.
Moving from theory to practice, a key point of the negotiation concerns the debt. According to the latest version, known as the Danish proposal, for countries with a debt exceeding 60% of GDP, the debt reduction safeguard would be triggered in the 4 years following the adjustment period which lasts 4-7 years. The times therefore extend to 8-11 years. It is a longer period than the EU Commission's proposal but still lower than the initial Spanish proposal which hypothesized a decrease to 14-17 years. The Germans, on the other hand, were asking for a cut already in the last year of the plan. However, Berlin was satisfied on another point relating to the roof deficit to 3% of GDP. After having brought the debt on a downward path, the States will have to have a "safety margin" (to be negotiated, the numbers are not there yet) on the deficit as a parachute for the accounts in the event of an unfavorable economic cycle. For Rome it would be penalizing, almost worse than the rules of the old Pact, but for Berlin it is fundamental.
Also, Italy for its part brought home a small victory over the investment incentives, also strongly desired by France. There is no separation or "golden rule" on green and digital that Rome was pushing for, but alongside the commitments on Pnrr, already foreseen by the previous text, a sort of exception has also arisen for investments linked to the national co-financing of EU funds: the Pnrr will be valid as a "transitional solution" to extend the plans up to 7 years. And the projects financed by the Pnrr in 2025 and the national co-financing of EU fundsthen, they will be taken into consideration whenever a Member State requests an exception to the safeguard of non-backloading - i.e. the principle intended to avoid postponements to the consolidation of accounts - provided that this does not jeopardize fiscal sustainability in the medium term ”. Finally, the increase in defense spending, as requested by France, will be taken into consideration as a relevant factor for the activation of the excessive deficit procedure.
Negotiations between Paris and Berlin
Germany and France have agreed on safeguard measures to ensure that debt is effectively put on a downward trajectory at the end of the adjustment path. As mentioned, a minimum annual debt reduction parameter will therefore be established which will be applied in the 4 years following the plan and will be calculated on the average of the four-year period. At the moment, however, the extent of this cut has not yet been quantified. “I'm working with my friend Christian to try to find a Franco-German agreement,” he explained Bruno LeMaire.
“The character of the proposals we are discussing has changed. It is now generally recognized that we need a safety line to reduce the national debt and also that some specific considerations are needed on the budget deficit,” the German Finance Minister said instead. Lindner.
It's Italy? MEF sources confirm that "Rome is not afraid" of the idea of introducing safeguards for the average annual decline in debt, as long as they are at sustainable and credible values, while restrictions on the deficit would be considered too penalizing.
