This Wednesday, the European Commission published a communiqué proposing new rules for financial supervision of member states that should replace the rules Stability Pact agreed upon by the countries when establishing the single currency. The new lines are primarily aimed at enhancing the debt sustainability of the most vulnerable countries (including Spain) and are based on a smaller but more effective sanctions regime given that existing sanctions have proven “unrealistic”. The words of the Commissioner for Economy Paolo Gentiloni.
They also seek to ensure that the regulatory framework is “simpler, more transparent and effective”, with more wiggle room for governments themselves so that it is possible to implement reforms and investments in pre-defined policies and reduce high debt rates. General “in a realistic, gradual and sustainable way”. The return of positive interest rates has not been ignored by Commission experts who fear that countries with a high debts They will face serious problems if they do not reduce their high debt levels.
The Commission’s proposal aims for countries to choose the path they prefer to rationalize public finances, rather than for the community executive to determine the path that governments follow, as is currently the case, despite few results. It is intended that countries remain on track to transition to a green economy “while ensuring fiscal sustainability in all states.New tax rules They will focus on reducing debt on the basis of the plans set out by the member states, which in turn must respect the conditions set by them” from Brussels.
Naturally, countries with more fiscal space and less debt will have a much greater capacity for these investments, while the most indebted countries, Greece, Italy and Spain, will have to introduce “gradual, realistic and feasible” plans to reduce them. In any case, a model of giving more time to governments achieving structural reform goals, based on what has been set for the management of recovery funds, must be approved by all member states, and it is considered that it will be difficult for member states. The proposal will be adopted without modifications. Perhaps for this reason, The Commission does not propose to change the reference values for the deficit (3% of GDP) and debt (60% of GDP) appear in the text of the 1997 Stability and Growth Pact, but considers the legislation must be reformed to implement its new guidelines.
The current rules, which have been suspended until December next year to allow countries more room to maneuver during pandemicIt is directly related to the austerity policies aimed at combating the excessive deficit of countries. Now, the Commission, on the contrary, wants to create conditions for budgetary stability to specifically encourage investment, while allowing more room for maneuver to choose the course of over-indebtedness correction. Each government will have a four-year reference budget path, adapted to its fiscal situation, always with the goal of keeping the deficit below 3%.
Each country will submit after that budget plan As much as it contains repair and investment commitments, you may get an additional three-year extension to lengthen your debt settlement plan, seven years in total. The Commission will assess each country’s plans and provide a positive assessment if the debt is put on a downward path or remains at judicious levels, and the deficit could reliably fall below 3% over the medium term. Subsequently, if accepted by the committee, the council will approve the plans whose implementation will in turn be supervised by the executive branch of the community.
The sanctions proposed in this initiative for non-compliant states would be more realistic, that is, much lower, precisely so that their issuance would not be as painful as the case now. Also, shortening the terms of debt reduction in the event of non-fulfillment of obligations is a form of indirect punishment.