Europeans have been negotiating a reform of their budgetary rules for months. They want to reach an agreement before the end of the year, before the stability and growth pact, suspended since March 2020, resumes service, as planned, on 1er January 2024. In this context, the Commission has put on the table a proposal which provides for a simpler, more flexible and more incentive framework in terms of investments and reforms.
The community executive retains the rules, enshrined in the treaties, under which the public deficit must not exceed 3% of gross domestic product (GDP), when the debt must remain contained at less than 60% of national wealth. But it is part of a more differentiated logic, which allows each Member State to define its budgetary trajectory according to its characteristics and its ambitions in terms of investments and reforms.
Germany, which considers this proposal too lax, fought for strict rules to be reintroduced, in terms of reducing debt and deficits. On the night of December 7 to 8, Paris and Berlin agreed on a Franco-German agreement which lays the foundations for the reform that the Twenty-Seven will adopt. A council of finance ministers should enable them to succeed on Wednesday, December 20.
In an interview with Worldthe economist Jean Pisani-Ferry, professor of economic policy at Sciences Po Paris, returns to what he judges to be “a temporary bandage”. Paris has made numerous concessions to Berlin, which serve France ” short term “but do not allow a satisfactory overhaul of European budgetary rules.
Does the Franco-German agreement make it possible to respond to the inadequacies of current European budgetary governance?
A certain consensus had been created among economists, both French and German, to say that the stability and growth pact, in its current version, is too complicated. Even politicians don’t understand it. As for parliamentarians, let’s not talk about it.
The European Commission’s proposal, which was based on this common diagnosis, was a good working basis. It was based on the principle that the main objective must be to maintain the solvency of member states. Since the bankruptcy of one of them presents a systemic risk for the European Union [UE]we must warn her.
Subject to debt sustainability, that is to say a prospective trajectory which eliminates the risk of insolvency, the idea was to give more control to States in setting their target and their budgetary trajectory. From then on, a differentiation was introduced between the member states. It is then up to the Commission to validate the budgetary trajectories of each party and to monitor their implementation in practice.
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