MNI: Investment Leeway Seen For Small EU States In Fiscal Deal

Changes agreed to the European Union’s proposed new fiscal rules will make it easier for smaller countries in particular to boost public investment, members of the European Parliament and other officials told MNI.

In a deal early on Saturday, Trilogue talks including the European Parliament, European Commission and Council ended with agreement on the legislature’s call for more flexibility over investment spending when calculating compliance with the new debt rules. In return, parliament accepted proposals agreed by member states in December for budget deficits to be limited to 1.5% of gross domestic product over the medium-term. (See MNI: EU Nears Fiscal Rules Deal In Trilogue Talks)

The Commission will now have to take into account investments in priority areas like defence, energy security and the green and digital transitions when deciding whether or not to launch excessive deficit procedures, MEPs noted. (See MNI: Italy To Seek To Avoid Excessive Debt Procedure)

“We are not saying that if you have done investment to a certain level you are exempt, but we are making sure that even less powerful countries, who can’t twist arms as effectively as big countries, will be able to avail themselves of the politics of the economic governance system,” one source said.

PARLIAMENTARY APPROVAL

In addition, spending on co-financing EU programmes will be exempt for purposes of calculating excessive spending deviations, something which went beyond the parliament’s initial request for this to be capped at 0.25% of GDP.

The Commission will also now be obliged to enter into a dialogue with states on the technical trajectory of their spending plans when it launches an excessive debt procedure. States will be allowed to submit revised fiscal plans if there is a change of government, and there will be a bigger role for national fiscal institutes than initially envisaged in the reform of the fiscal rules in the EU’s Stability and Growth Pact.

The new fiscal reforms are now set to be approved in the next few weeks by the Parliament, with its two biggest groups, the centre-right EPP and the Socialists, as well as the liberal Renew group, satisfied with the outcome of the Trilogue talks.