MNI: EU Officials Doubt Gentiloni's Fiscal Rules "Consensus"

European Union officials are doubtful that the “broad consensus” over reform of the bloc’s fiscal rules will be reached by March in line with a call by Economy Commissioner Paolo Gentiloni, several told MNI.

While the Swedish presidency is putting a high priority on talks over the Stability and Growth Pact debt rules, more political impetus will be required to shift opposition, officials said, with progress needed at the Feb 9-10 leaders summit. While the European Central Bank has tried to encourage reform, it also remains an open question as to how much sway it now has over finance ministers compared with the 2010-11 debt crisis.

“There are still clear and major differences between countries,” one source said following a recent round of talks.

In recent days, ECB President Christine Lagarde and Bank of France President Francois Villeroy have called for rapid agreement on the long-delayed dossier of EU economic governance reform in order to pre-empt concerns over financial market stability as interest rates continue to rise and the central bank starts the potentially fraught process of winding down its near EUR8-trillion balance sheet. (See MNI: EU Fiscal Reform Faces Tough Opposition-Officials)

BOOST TO COMMISSION'S POWER

The Commission’s proposal for reform of the rules proved highly controversial when discussed by EU finance ministers in December. They are set to meet again in Brussels on Monday and Tuesday, but many remain concerned by the Commission’s idea for bespoke four-year debt-reduction plans for high-debt states, which they fear would enhance the power of the Commission at the expense of member states. (See

Following a recent visit to Berlin by Gentiloni, German Finance Minister Christian Lindner called for fiscal rules that are “verifiable” and “not subject to political whim”, although he also wanted a realistic and flexible framework that would allow countries to implement investment plans.

Lindner was not alone in his objections.

“There is very wide agreement on keeping the framework multilateral and maintaining peer review. If left to the Commission, the system will lack depth,” one official said. “The question is how do you bring multilateral aspects into the Commission proposal for bespoke debt-reduction plans.”

The lack of agreement on even a broad outline for a new regime will soon start to have consequences for EU fiscal surveillance, with a statement from the Eurogroup on fiscal strategy for 2024 due in March.

One EU official conceded that this would indeed be a “peculiar situation” and underlined the fact that the rules are meant to embody the principles of good fiscal practice.

“But that doesn’t mean we can’t define what good fiscal policy looks like. The Eurogroup’s communications will just have to be stepped up to fill the void,” he added.