MEPs validate the reform of the European Union’s budgetary rules

Gathered for the last plenary session of their mandate at the European Parliament in Strasbourg, MEPs approved, on Tuesday April 23, the reform of the budgetary rules of the European Union (EU), intended to guarantee the recovery of public finances of Member States while preserving investments.

The text, fiercely negotiated for more than two years, is considered by left-wing elected officials as a tool establishing austerity in Europe. But he won broad support from the three main political groups: the conservative EPP, the social democrats S&D and the liberal Renew Europe.

The reform aims to modernize the stability pact, a “budgetary corset” created at the end of the 1990s which limits the public administration deficit for each country to 3% of GDP and the debt to 60%. The new rules are “more flexible, more credible in their implementation”they “will allow a gradual reduction of public debt without compromising growth”said the European Commissioner for Economic and Monetary Affairs, Paolo Gentiloni, during a debate just before the vote.

“Return to budgetary responsibility”

An agreement on this reform was reached on February 10 between negotiators from MEPs and those from member states. The text will be applied this year by the finance ministers of the Twenty-Seven to prepare their 2025 budget.

While confirming these emblematic ratios, the new text makes a little more flexible the adjustment requested from EU countries in the event of excessive deficits, if they agree to investments and structural reforms. Above all, the effort will be adapted to their individual situation.

Concretely, it provides that States present trajectories over four or seven years in order to ensure the sustainability of their debt. The management will focus on the evolution of expenditure, an indicator considered more relevant than deficits, which can fluctuate depending on the level of economic growth.

But Germany and its allies “frugal” have obtained a minimum quantified effort to reduce debt and deficits for all countries with excessive deficits, despite the reluctance of France and Italy. These modifications with a view to toughening have partly distorted and greatly complicated the text.

EU finance ministers painfully reached a common position, just before Christmas, on this reform which intends to combine budgetary seriousness and safeguarding the investments necessary for the green transition or defense. It is the result of a balance between the position of the indebted countries of southern Europe, like France, which insisted on additional flexibilities, and the so-called “frugal” from northern Europe, behind Germany, who demanded more rigor.

“This reform constitutes both a new departure and a return to budgetary responsibility. The old rules had many weaknesses and shortcomings, they suffered from almost non-existent implementation”welcomed German conservative MEP Markus Ferber. “We have secured a strong social footprint in the new rules”said Portuguese socialist MEP Margarida Marques, co-rapporteur of the text.

The Greens and certain S&D elected officials, however, reject it en bloc, as do the radical left. They denounce a return to austerity which will slow down investment and benefit populists, after three years of suspension of European budgetary rules in the face of the double shock of the pandemic and the war in Ukraine.

The new rules “unjust and deadly” are going “impose a straitjacket on all European states” And “create the conditions for political impotence”, warned Belgian environmentalist MEP Philippe Lamberts. This agreement “will require Member States to reduce their debt quickly and in a way that is not economically and socially sustainable: this will mark a return to austerity”Belgian, French, Italian and Spanish unions judged Monday in an open letter.