MNI: Positive Start To EU Debt Reform Talks, Long Haul Ahead

Eurogroup Chairman Paschal Donohoe hopes to build on a constructive initial meeting by eurozone finance ministers on reforming European Union rules on public borrowing by drawing together common themes from statements next month ahead of draft national budgets, officials told MNI.

Looking to build consensus in what are expected to be drawn-out talks on revising the Stability and Growth Pact, Donohue will seek to identify early areas of agreement.

"The idea of the president of Eurogroup is to use [the pre-budget statements] to try and put together a few key messages to advance their discussion on coordinated budget policy - the need for more targeted investment and key common principles for how to continue budget policy at the national level," one source said.

VISIT TO DRAGHI

Donohoe is making a round of calls to EU finance ministers to try and home in on areas where flexibility could make a deal possible. One of the most important contacts will take place on Thursday when he visit Italian Prime Minister Mario Draghi and Finance Minister Daniele Franco in Rome.

Donohoe plans to have completed all his calls by the end of November, allowing the Eurogroup to send out "key messages" at the Dec. 6 meeting.

While December will be a kind of first if subtle step in the process of getting agreement on reform, the next, bigger step will come at the March Eurogroup – as reported by MNI last week - when the Commission will issue guidance for member states' budgets in 2023, when the Stability and Growth Pact is set to be reactivated.

"The question from finance ministers then will, 'are we reactivating the SGP and, if so, under what conditions?" the source said.

Sources caution not to expect rapid progress, with northern countries likely to resist southern proposals such as more time to reverse overshoots of borrowing limits

While Monday's meeting of the Eurogroup was as good as could be expected, it is very early days.

"We know where member states stand and that positions are quite different, but everyone agrees it is about striking the right balance between fiscal sustainability and the room to make the kind of investments which will boost growth."