MNI: Spain's EU Presidency Working On New Fiscal Rules Draft

The European Union’s rotating presidency is working on a new landing zone proposal for a reformed fiscal rules regime for the bloc following a messy meeting on Monday night of sherpas charged with preparing the ground for a political compromise ahead of a crunch Dec 8 meeting of finance ministers, officials told MNI.

A political deal is still possible at the December meeting, even if this is only a “progress report”, though time is running out to ready a finalised legal text by then, they said, making it more likely new rules on borrowing will only be finally approved by the new European parliament after mid-year elections.

“It got a bit messy because there are still so many open issues, many more than mentioned in the Spanish presidency's issues note. But that was clear from the start. People are working on a new draft for a landing zone now. But an agreement on the legal texts before the end of the year seems completely impossible now,” said on source present at Monday’s meeting of officials from the Economic and Finance Committee, which took place over a dinner in Brussels. (See MNI POLICY: EU Fiscal Deal Taking Shape Before December ECOFIN)

TRADE-OFFS

While the key trade-off between Germany and the so-called “frugal” states on the one hand and the high-debt states on the other remains intact following concessions on minimum debt and deficit safeguards in exchange for more time for debt consolidation programmes, the drafting of legislation appears to have opened a wide range of other issues that were not touched on in Spain’s last proposed landing zone.

Any delay to the legal text will compress the time available for the European Parliament to agree on legislation before the end of its term in June 2024, but officials believe that a political deal between EU states would be enough for the European Commission to start a transition to the new fiscal regime from early 2024.