For the Commission, it is clear that the Stability and Growth Pact cannot remain as it was. But after loud demands from the traffic light coalition that it needed fixed benchmark values, Brussels wants to respond to Berlin’s criticism. Table.Media is familiar with the proposal, which will be presented by the Commission today. The key points: In the future, the states will be given national reference paths for budget restructuring, and there will be some fixed criteria, report Till Hoppe and Christoph Roche.
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Fiscal reform: How the Commission wants to encourage governments to save money
The EU Commission is proposing a departure from the current budget rules for EU states. In the future, the Brussels authority wants to give countries national reference paths for budget restructuring. These are to be the basis for negotiations with governments on their medium-term fiscal and reform plans. The proposal will be presented today, the draft was available to our colleagues from “Contexte”.
The Commission should consider some criteria in the reference paths:
- the level of debt should be lower after four years than at the beginning of the period;
- net primary expenditure (excluding interest charges, one-off expenditure and cyclical expenditure for unemployment) is expected to increase at a lower rate than the economy’s potential growth;
- the consolidation should not be pushed back within the period (no backloading);
- if the expected budget deficit is more than three percent of GDP, expenditure should be reduced by at least 0.5 percent annually – probably without initiating an excessive deficit procedure.
‘Substantial concessions’ to Berlin
The Commission is thus addressing the German government’s concerns to some extent. The traffic light coalition is calling for fixed criteria for national spending paths and fiscal plans to limit the Commission’s discretionary powers. For example, primary spending by highly indebted countries should be at least one percent below the potential growth of their economies, the German government wrote in a position paper in early April. In addition, these countries should have to reduce their debt levels by at least one percentage point per year.
- European policy
- Financial policy
- Stability Pact
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