In an exceptional situation, an exceptional measure. On March 20, 2020, in a confined Europe, the President of the European Commission, Ursula von der Leyen, announced the suspension of the Stability and Growth Pact. A first. Governments could therefore spend “whatever it cost”. In the name of saving the economy, Brussels put on hold the famous rules which stipulate that the public deficit and the debt of a Member State must not exceed 3% and 60% respectively of the gross domestic product (GDP).
The suspension of the Stability and Growth Pact is due to end on December 31. The finance ministers of the Member States are due to meet in Brussels on Thursday 7 and Friday 8 December to negotiate a new one. Therefore, a question emerges: is it really necessary to reestablish rules after more than three years of suspension? Are they useful?
“They are essential,” replies economist Pierre Jaillet, associate researcher at the Institute of International and Strategic Relations (Iris) and the Jacques-Delors Institute. Let us not forget that there is no federal fiscal policy within the eurozone; It is therefore necessary, to ensure the viability and sustainability of the economic and monetary union, to coordinate the budgetary trajectories of the 20 States of the euro zone. »
A more flexible pact
The new reformed pact was proposed by the European Commission. Imagined in 1997, the budgetary framework in force until 2020 was considered obsolete in more than one way. Some states, including France, have barely respected the deficit targets. And the sanctions planned in response, which were too heavy, were neverbeen implemented. Furthermore, the text was not adapted to respond to the financing challenges of the ecological transition, which have since emerged.
This reform will not affect the 3% and 60% rules which are enshrined in treaties that are difficult to call into question. But it aims to introduce more flexibility. Because if these objectives were not met, they still left their mark on state policy.
“Public investment has been hampered in Europe,” says Francesco Saraceno, deputy director of the studies department at the French Observatory of Economic Conditions (OFCE). After the 2008 crisis, we deployed an austerity policy, where the United States invested massively. After the European sovereign debt crisis in 2010, fiscal tightening led by Germany stifled the recovery. »
A reform, but not a revolution
Does this mean that the European states with this new pact are preparing to overturn the table? Not quite… “If the Commission’s proposal is applied as it stands, this will allow countries to invest more in the ecological transition, but this will remain insufficient,” summarizes Andreas Eisl, researcher at the Jacques-Delors Institute. This reform is a step forward, but it does not fundamentally change the approach. »
Concretely, for each Member State which does not respect one of the criteriaof Maastricht, the Commission would publish a “plausible downward trajectory” for the debt, over four years. Trajectory that governments will have to integrate into their plan. An additional period of three years may be granted, provided that countries embark on structural reforms and carry out “strategic investments”.
If a State does not respect its commitments, it could always be subject to an “excessive deficit” procedure and find itself subject to sanctions. Less cumbersome than those provided for by the current pact, they should be easier to implement.
Disagreement between Paris and Berlin
Germany criticizes this approach. Berlin is in fact not in favor of the idea of defining trajectories on a case-by-case basis. “The Germans fear that this system of bilateral agreement between the States and the Commission gives the latter too much room for maneuver,” analyzes Andreas Eisl.
For economist David Cayla, the Commissionhas in his hands a “powerful lever”. “It’s problematic, because she judges as a technician and little about politics. It will define the budgetary trajectory of a State by evaluating structural growth according to its own calculations. It will thus be able to put pressure on States,” assures the researcher from the Granem laboratory at the University of Angers.
Germany also wants a country which is the subject of an excessive deficit procedure – France could be concerned –does not benefit from any flexibility. And this, even if it invests in defense or ecological transition. Paris doesn’t see it that way. Will the two neighbors be able to come to an agreement?
Thirteen Member States have a debt exceeding 60%
Six countries in the European Union still have public debt greater than 100% of their GDP. Greece is the most indebted country (167%). Followed by Italy (142%), France (112%), Spain (111%), Portugal(110%) and Belgium (106%).
For its part, Germany has a debt which stands at 64.6% of its GDP. In total, 13 Member States do not respect the 60% rule.
Luxembourg (28%), Bulgaria (22%) and Estonia (19%) have the lowest debt ratios in the EU.