by Maria Martinez and Belén Carreño
SAINT JACQUES DE COMPOSTELA, SPAIN (Reuters) – European Union (EU) finance ministers backed a timetable on Saturday calling for reform of the bloc’s tax rules by the end of the year, while that they seek a balance between debt reduction and investment.
“It may be a challenge, but the Spanish presidency is committed to respecting this timetable and today we have defined the way to achieve it, the fiscal ‘camino’,” said the vice-president. President of the European Commission, Valdis Dombrovskis, during a press conference.
Valdis Dombrovskis was referring to the “camino de Santiago” or Way of Saint James, used by Catholic pilgrims to reach the shrine of the Apostle James in the cathedral of Santiago de Compostela, the northwestern city of Spain where the negotiations took place.
EU fiscal rules are the basis for the value of the euro used by 20 countries and set a limit on budget deficits of 3% of GDP and a limit on public debt of 60% of GDP.
Most EU countries exceed these limits, however, as two years of the COVID-19 pandemic and the energy price crisis have required massive public spending.
As a result, the Commission and EU governments are discussing changes to the framework that would take into account the large differences in debt levels and economic growth between EU countries, while ensuring equal treatment.
The main conflict is between Germany, which wants identical annual debt reduction criteria for everyone, and France, which defends individually negotiated debt reductions by arguing that uniform policies do not work.
The need to encourage governments to invest in the green and digital transition of their economies and to incur significant defense spending after Russia’s invasion of Ukraine adds to the complexity of the negotiations.
Spanish Finance Minister Nadia Calvino said Spain, which holds the rotating EU presidency until the end of the year, was aiming for an initial deal at the next meeting of finance ministers in October , but that further discussions may be necessary.
According to her, 70% of the text of the new rules was approved as part of the technical work carried out during the summer.
“The time has come to seek a compromise, which will have to strike the right balance between sustainable debt reduction trajectories and ensuring the necessary fiscal space for investments, as well as incentives for structural reforms,” said Nadia Calvino .
(Reporting by Maria Martinez, Belen Carreno and Jan Strupczewski, French version Benjamin Mallet)
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