With an overwhelming majority, the European Parliament adopted its negotiating position for the EU rules on national debts and deficits, despite Green fears that it could lead to renewed austerity and destabilise the European Union.
After more than a year of negotiations, EU finance ministers in December agreed on a joint position on a reform of the EU’s rules for national budgets, known as the Stability and Growth Pact.
The core of the proposal, which would see more flexibility for member states’ spending, still needs to be agreed with the European Parliament.
“The review of the economic governance framework has been a key commitment of this Commission, and the reform has long been due,” EU Economy Commissioner Paolo Gentiloni, said ahead of the vote, urging the Parliament and EU countries to quickly finalise negotiations.
“We all know the limits of the old rules, that are the existing rules, in the current uncertain economic and geopolitical environment,” Gentiloni said, referring to criticism that the old rules impose unrealistic budget cuts on member states and therefore have not been sufficiently enforced.
The Parliament followed his call to move quickly, adopting its negotiating positions without any amendments with a large majority of 431 yes votes, 172 votes against and 4 abstentions.
“We need to take responsibility to protect the credibility of the Union and the stability of the eurozone by agreeing on new rules that are realistic and can be and will be respected and enforced,” Esther De Lange of centre-right EPP group, one of the two lead negotiators on the file, said during the debate.
“There will be those on the extreme right and the extreme left of the house that will vote against the mandate to deliver this better framework,” she said, adding: “no surprises there”.
“What I find more regrettable is the position of the Greens,” she added, blaming them for being “strong supporters of the euro, but against the very rules needed to keep it strong and stable”.
Austerity or no austerity
Ahead of the vote, Green co-chief Philippe Lamberts had warned against the implementation of the new rules, which in his view will be “equally detrimental and equally unworkable” as the old rules.
“This is sleepwalking Europe into a disaster,” Lamberts warned in an interview with Euractiv and EUObserver, arguing that strict limits on public spending could strengthen the far-right and weaken Europe’s support for Ukraine in its defence against Russia.
While Lamberts said he “will do whatever I can to derail the process” to agree on new fiscal rules, his resistance is unlikely to stop the process as the Parliament’s position was carried by a broad majority made up of members from EPP, centre-left Socialists and Democrats (S&D), liberals and national-conservative ECR.
“The Socialists and Democrats are a responsible political family, and we are a trustworthy partner who will maintain this fight,” said Margarida Marques of S&D, the second chief negotiator for the Parliament.
“We don’t want to see austerity, we want to see investment, we want rules that will promote growth,” she said, highlighting that the Parliament’s position would include more flexibility for member states’ spending than the initial proposal by the European Commission.
“We’re not one of these parties who say they don’t want austerity, but are de facto agreeing to this with the return of the old rules,” she said, in reference to the Greens’ resistance.
Without an agreement on the reform of the rules, old rules would apply again as of this year, as the European Commission has not prolonged a crisis-related suspension of the rules, which had allowed member states to take on more debt since the beginning of the COVID-19 pandemic.
Only “few weeks” to conclude
“We don’t want to have new objectives for deficits,” she said, highlighting the main difference between the Parliament’s and member states’ positions.
Finance Ministers in December decided that countries with an annual budget deficit of more than 1.5% of GDP will have to reduce this deficit by at least 0.4% a year, which can be reduced to 0.25% per year in case of an extension of the so-called “fiscal adjustment period”, requiring the country to commit to reforms and investments negotiated with the European Commission.
Given that this “numerical benchmark” was an essential condition for debt-averse negotiators, such as German Finance Minister Christian Lindner (FDP/Renew), to agree, it seems unlikely that major changes can be made to the finance ministers’ agreement.
Belgium, which currently holds the rotating presidency of the EU Council, wants the negotiations to move quickly, with a first meeting taking place already on Wednesday at 1pm.
“Council’s position represents a delicate balance between all the member states,” Belgian Foreign Minister Hadja Lahbib (MR/Renew) said during the EP debate.
“We know that there are only a few weeks left to conclude this file,” she said, calling this an “extremely tight time frame when we look at the complexity and sensitivity of the subject.”
[Edited by Nathalie Weatherald]
