MNI: European Parliament To Seek To Dilute Fiscal Rules

Members of the European Parliament are likely to push for dilution of the tough cuts in budget deficits outlined in proposed new fiscal rules for the bloc in upcoming “Trialogue” negotiations between the legislature, member states and the European Commission, parliamentarians and a senior EU official told MNI.

Under the proposal’s “deficit resilience safeguard”, member states would have to keep budget deficits to a maximum of 1.5% of gross domestic product over the medium term, to ensure sufficient leeway to avoid breaching the 3% upper limit during economic shocks or recessions. The reform of the Stability and Growth Pact agreed by member states on Dec 20 would also require states in fiscal adjustment plans to reduce deficits by 0.4% of GDP a year in order to meet the 1.5% margin.

The two biggest political blocs in the European Parliament, the Socialist S+D and centre-right EPP, have already agreed a compromise position excluding the resilience safeguard, and this looks likely to command a majority in the legislature’s plenary session in Strasbourg next week, parliamentarians said.

TIMELINE UNCLEAR

For the moment, the timeline for the Trialogue negotiations is uncertain. Before they can start, the parliament’s ECON committee has to announce a mandate for its negotiation team at its next Jan 15-18 plenary session. The Greens look set to oppose this, and while they are unlikely to succeed, if they did then another vote would have to take place in February.

A senior EU official said it was difficult to say how much wiggle room states would offer to adjust their proposed reform, which was agreed only after difficult negotiations in which Germany insisted on the resilience safeguard. (See MNI: EU's Likely New Fiscal Deal Sounds Tough, Details Lacking)

“There needs to be a balance and parliament needs to have its say - that is its prerogative,” the official said.