EU fiscal framework: the inevitable debate

Editorial of the “World”. A few days before the opening of the French presidency of the European Union (EU), the 1is January for six months, Italian Prime Minister Mario Draghi and President Emmanuel Macron have launched a joint call for the reform of fiscal rules within the EU, jointly laying down the terms of a substantive debate on economic strategy of the coming decade.

This double signature at the bottom of a tribune – which, curiously, the two leaders have chose to have a British newspaper published, the Financial Times, December 24, rather than by EU media – will not surprise anyone. Paris and Rome are at the forefront of the fight of the so-called southern European countries against the Community budgetary orthodoxy which restricts public spending. The French President’s position in favor of relaxing these rules is well known; the aura of the former head of the European Central Bank and savior of the euro, now the Italian economy’s rectifier, gives it more weight.

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But the two leaders believe the time is right to drive a wedge. Europe, they argue, has entered a new era whose challenges require large-scale investments in infrastructure, digital technology, research and defense; this implies changing the budgetary framework. When the emergency arose in 2020, when the economies of the member states threatened to collapse under the effect of the pandemic, politicians were able to adapt these rules and innovate, with a European recovery plan massive, financed by a common debt.

Economics, not legal

We must continue this momentum, advance Draghi and Macron, while recognizing the need to reduce the level of debt; public expenditure which will finance this type of investment on the priorities of the future “Will, in fact, contribute to long-term debt sustainability”.

It remains with MM. Draghi and Macron to convince, mainly, their German and Dutch colleagues, traditionally at the head of the group of refractories to the relaxation of the budgetary framework, of the merits of their argument. Chancellor Olaf Scholz has, according to the Elysee, been informed in advance of this forum. It so happens that Mr Scholz and Prime Minister Mark Rutte have both just negotiated government coalition agreements which do not close the door to an evolution of European rules; the road, however, will be long.

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Emmanuel Macron, for his part, has no interest in launching a frontal debate with Berlin on budgetary rules in the middle of the French electoral campaign. The Head of State wants to assert his European record and therefore prefers to approach the subject differently: rather than fixing on the rules, starting from Europe’s investment needs to face climate and digital transitions, to reduce dependencies from which it suffers and to be able to exist between China and the United States. Start from the economy, not from the legal, one sums up in Paris.

A European summit on this issue is scheduled for March 10 and 11. Once the Twenty-Seven have agreed on their objectives – from this point of view, the subject is relatively consensual – the time will come to ask how to achieve it. Each separately? All together, by a common debt? Or with the help of adapted budgetary rules? This necessary debate will animate the second half of 2022. He promises to be agitated and confrontational.

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EU fiscal framework: the inevitable debate