The EU is about to reach an agreement on the modernization of the Stability Pact

The European Parliament and member states reached an agreement overnight Friday to Saturday, February 10, on a reform of EU budget rules designed to ensure the recovery of public finances while preserving investment.

photo euro banknotes and the flag of the European Union

The EU is on the way to a new deal on its budget rules Photo: Shutterstock

The Belgian presidency of the EU Council announced the new deals on the X social network with a post with the text “Agreement”. The text, which has been under discussion for more than two years, has been criticized for being too complex and denounced by left-wing MEPs as a tool to install austerity in Europe Pressed for time, negotiators finally reached an agreement after 16 hours of talks, reports Le Figaro.

Given the procedural deadlines, it was absolutely necessary to reach an agreement so that the text could be voted on in the plenary session in Strasbourg in the spring, before the parliamentary recess that precedes the European elections in June. The agreement reached last night will allow member states to apply the new rules starting this year for their 2025 budgets.

I welcome the political agreement on our ambitious reform of EU economic governance for a competitive and fair European economy“, said the President of the European Commission, Ursula von der Leyen, on the X social network. “The new rules will allow EU countries to invest in their strengths while strengthening their public finances.”

The new rules will “contribute to the balance and sustainability of public finances, structural reforms, investment promotion, economic growth and job creation in the EU”stated the Belgian Presidency of the EU Council on X.

The reform aims to modernize the Stability Pact, created at the end of the 90s, which limits the general public deficit of each country to 3% of GDP and the public debt to 60%. Considered too drastic, this framework was never really adhered to and was considered obsolete. Although it confirms these flagship rates, the new text makes the adjustment required of EU countries in case of excessive deficits a little more flexible. Specifically, it provides for member states to present their own adjustment path to ensure their debt sustainability, giving them more time if they undertake reforms and investments.

The guidance would be based on changes in spending, an indicator considered more relevant than deficits, which can fluctuate depending on the level of growth. But Germany and its “frugal” allies managed to tighten the fiscal framework by imposing a minimum quantified effort to reduce debt and deficits for all EU countries, despite the reluctance of France and Italy.

These changes partially distorted the draft and made the text much more complex. Shortly before Christmas, EU finance ministers struggled to reach a common position on the reform, which aims to combine budgetary discipline with safeguarding the investments needed for the green transition and defence.

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