Brussels Believes That The Reform Of Fiscal Rules Is Inevitable After The Pandemic
2021-01-31 | by CusiGO
The long lamp is ready for poscovid Europe. After the epidemic hit the public finances of 27 countries, Brussels has put forward a new proposal to reform fiscal rules. The European Commission hopes to reopen the debate between the member states of the EU club before the summer, with as little enthusiasm as possible. In addition, it intends to do so at the same time as the ECB conducts a thorough review of its strategy to achieve price stability. The rotating presidency of the European Union and the European Parliament are also trying to push forward the process of revising tax rules.
Brussels believes that after the worst economic recession since the establishment of the European project, the epidemic will once again hinder the economic take-off. In the short term Severe restrictions on a new wave of infectious diseases and delays in vaccine supply have hurt the recovery, so much so that Rome or Paris question whether a 750 billion euro recovery plan is enough to revive the economy. In the summer, the government is still building safety nets to prevent massive corporate deaths or accelerated unemployment.
The message from Brussels is clear: it is too early to consider withdrawing support for the economy, and since no one can guarantee the length of the tunnel, those who believe that tax rules should also be suspended in 2022 are right. “It is very important not to exit the stimulus too early, but to ensure that the exit clause (which effectively suspended the rules) remains in effect until the economy returns to its pre crisis level,” said Portugal’s finance minister and rotating president of the EU economic and financial Council. Joao Leon said at a hearing in the European Parliament this week.
In any case, the debate will start in the spring and last up to the summer. People’s eyes are focused on the position of the Hague, which is the leader of the hawk group, but is currently conducting the March 17 election. Even so, community agencies make sure it doesn’t go from free bars to dry bars. “Let me stress that this is not an imminent exit from fiscal stimulus,” Pascal Donohoe, chairman of the Eurogroup, said of the first talks.
Luis garicano, vice chairman of renew Liberal Party, said: “if the full exit clause remains in effect by 2022, I do see a window of opportunity to reform the tax rules.”. The European Parliament is drafting an initiative report on economic governance and tax rules, the first draft of which is expected to be completed in March next year. The document will be the first milestone in the discussion of reform. Jon á s fern á ndez, coordinator of the European Social Democratic Party of the European Parliament’s economic and Monetary Affairs Committee, believes that this can be done during the French presidency in the first half of 2022.
Capitals are waiting for a proposal from Brussels. In the committee’s view, these rules must be adapted to a fiscal situation far from the sacred limits of the stability and Growth Pact: a government deficit of 3% of GDP and a debt of 60%. According to the latest forecast of the European Commission, EU countries will end in 2021, with deficits of 9%, debts of 111%, Greece of more than 200%, Italy of more than 150% and Spain and France of close to 120%. These autumn forecasts are probably out of date.
The Portuguese President, who also wants to reopen the debate, also believes that the EU is in a brand new and unfriendly situation: in just a decade, it has experienced two of the biggest crises since the Second World War, public debt has soared, and interest rates are still on a negative basis.
This week, Paolo gentiloni, the economic affairs commissioner, picked up his gloves. At an internal seminar with officials in his department, he defended the need for “common standards” in the EU. However, he warned that this “does not mean simply going back to the old tax rules.”. “We will continue to review our rules and will strive to do so in parallel with the ECB’s monetary policy review,” gentiloni announced, promising that this “interaction” would not infringe on the “independence” of the institution led by Christine Lagarde.
Germany and France are signaling support for reform. The people in Paris are clear, and they even want to examine the whole economic control policy more deeply, including state aid. Wolfgang Sch ü uble, the speaker of the Bundestag and a hawkish former minister, told the financial times that he sympathized with those who wanted to reform the rules before they were restarted. “After the pandemic, a lot of things will be totally different,” he said. This has been reiterated in the need to continue reform.
Moreover, European institutions are concerned that the rate of public debt reduction under current rules will jeopardize growth. “The rules will change yes or no. In the case of public debt, for example, it is impossible to apply these rules. Jon á s fern á ndez believes it is hopeless for a country like Italy or France to cut it to 60% at the current rate of adjustment.
However, we can also see the Hawks’ position, they are waiting for the proposal of moving tiles. The third executive vice chairman of the committee, Valdis dombrovsky, a Latvian conservative, recalled that such rule reform must correct the “Periodicity” of the existing rules. “We are discussing the fiscal stimulus measures that should be taken during the crisis, but during the economic boom, we see that some countries have not used their wealth to reduce their debt,” he told the national.