Surprise, Spain and Holland they move together to ask the European Union more flexible fiscal rules. Above all, the turning point of the Amsterdam government is surprising, until now considered the leader of the "Frugal" countries, the ones that have always defended the rigor of the accounts most strongly. The pandemic before and the war after (passing through the Dutch elections, which are now behind us) have evidently suggested a change of course.
The document of Spain and Holland
Spanish Finance Minister Nadia Calviño and her Dutch counterpart Sigrid Kaag agreed an informal settlement proposal which is already circulating in Luxembourg, where between today and tomorrow the Eurogroup and then the Ecofin will meet first.
The document admits the need to reform the Stability Pact in a more "realistic" sense, permitting differentiated and tailor-made budget strategies for the various countries, so as to deal more effectively with decidedly higher levels of debt than in the past.
The news – anticipated by Politico in his morning “Playbook” – was confirmed by sources in the French finance ministry, which manages the rotating presidency of Ecofin.
The debt rule
The need to reform the Stability Pact, now suspended, has been talked about for months now. At the heart of the debate is above all the rule that requires the share of public debt exceeding 60% of GDP to be reduced by one twentieth a year. Indeed, with the levels of debt caused by the pandemic, the law would oblige most countries to implement austerity measures which would not only impede recovery, but would also risk causing a new recession.
The focus on investments
Spain and the Netherlands therefore underline that “high quality public investment” are needed to meet Europe's green and digital ambitions. The word "investments" is mentioned 11 times in the document, which is just a page and a half long. There is, however, no explicit reference to the proposal of "golden rule” advanced by other countries, including Italy.
Rigorism does not disappear
The document also supports the need to build up budget reserves "to prepare for the next shock": the idea would be to allow governments to borrow in times of crisis, but requiring that the debt be reduced in times of economic growth.
Finally, a concession to rigor: for those who fail to achieve the debt reduction objectives, "safeguard" mechanisms, i.e. sanctions, should be triggered.
