Ecofin Europe assumes that the reform of fiscal rules will not be completed this year

No discussion on the candidates to preside over the European Investment Bank nor a formal proposal for an agreement on the reform of fiscal rules

Ecofin Europe assumes that the reform of fiscal rules will not be completed this year

No discussion on the candidates to preside over the European Investment Bank nor a formal proposal for an agreement on the reform of fiscal rules. The EU Ministers of Economy and Finance met this week in Santiago de Compostela, and although at the beginning of summer expectations were very high and they were confident of being able to put two of the most relevant issues on track at this meeting, the differences or the doubts are still too great. There are still five names on the table for the position to which Nadia Calviño aspires and with each passing day it becomes more difficult for there to be a new fiscal framework before she is removed from the induced coma in which she has been since the beginning of the pandemic. Stability Pact. Both processes have the same deadline, January 1, 2024. And now, ironically, both may become linked in an unwanted way.

The general feeling among the delegations of the 27 member states and the European institutions is that there is no material time to conclude the debate on time during the Spanish presidency. In the most optimistic calendar, which is in itself very ambitious, our country, which holds the temporary presidency of the Council of the EU, would put a proposal for an agreement on the table at the next Ecofin, in mid-October in Luxembourg. From there, in just four weeks, there would be an agreement and the November Ecofin would be used to sign the agreement. Just in time to begin the negotiation with the European Parliament in the so-called 'trilogues', seeking the miracle of concluding everything before the end of December.

"It's impossible. It's not a drama, it's not a failure, but it's impossible at this point," summarizes a European diplomat. "If they manage to present the proposal and the debate is smoothed out so that we can reach an agreement at the beginning of the year and everything is settled before the European Elections, I will be satisfied," says a second participant in the meeting. Vice President Valdis Dombrovskis in the final press conference also mentioned that deadline as the ultimate goal for the new framework to be in place and serve for the fiscal guidelines and recommendations of each country in 2025.

But despite everything, Spain publicly maintains the faith. "We have already agreed on 70% of the text and we are going to propose to the ministers to move on to the political negotiation of the remaining 30%. With an adequate balance between a sustained reduction in the ratios of public debt over GDP [...] accommodating the necessary investment and incentives to address structural reforms. With these words this Saturday the first vice president of the acting Government, Nadia Calviño, summarized the state of the matter regarding the reform of fiscal rules, one of the most important debates for the future of the Eurozone and the most relevant dossier perhaps of what that remains of the Spanish presidency. We have an ambitious schedule for the new rules to be applied starting in 2024. It has been a day that can only be assessed as extraordinarily positive," summarized the Spaniard.

Calviño wanted to leave his personal future in Santiago de Compostela resolved. To avoid scares, so that everything is not involved with the investiture attempts. But also to prevent the dossiers of the European Investment Bank and the fiscal rules from ending up spilled. Several delegations explain that leaving the door open makes it possible for us to see additional complications. "If a candidate had emerged from this meeting there would be no problems. But now each capital can go to Calviño with the shopping list," European sources explain to this newspaper.

A good example is Italy, which has presented Draghi's former minister Daniele Franco to lead the EIB. In the summer, when the Spanish woman stepped forward, they assumed that Franco had nothing to do, and a part of the Government suggested his name to fill a seat that will soon be vacant on the Council of the ECB. That idea was discarded, in favor of a technician who has finally been approved, so Franco returned to the EIB career. Not so much because he has opportunities but as a negotiating tactic. In exchange for Italian support come requests, also regarding the future of fiscal rules. And the same goes for everyone, especially Germany. The Spanish vice president needs Berlin. She has the sympathy of the socialist Chancellor Scholz, but not of the liberal Finance Minister Lindner. She now can push doubly with her demands for objective annual adjustment numbers for the countries with the most deteriorated public accounts.

The idea of ​​reforming the rules is to make them more realistic, effective and tailored to each country. The spirit with which the European Commission designed them is to dispense as much as possible with equal adjustments for different countries, but Berlin encouraged that this initial proposal include a reduction in the deficit of at least 0.5% annually for the most indebted. France and Spain would like to erase that, but Germany would also want to add an annual debt reduction (in the model used until now a reduction of 1/20 is imposed each year). So the discussion is very delicate. It seems unlikely that there are no objective numbers, but consensus formulas are being sought to square the circle: reduce risk without affecting growth. And Spain trusts that the help of Denmark or the Netherlands, historically hawkish on this issue, will achieve a landing zone that has yet to be defined. To begin with, these days contacts will multiply. In New York within the framework of the UN meeting.

At the beginning of October in Madrid, at the level of the technicians who prepare the Eurogroups. And, according to presidential sources, it is not ruled out that there will be some additional Ecofin in the coming weeks, in person or videoconference, if necessary to press the accelerator. Commissioner Gentiloni recalled from Santiago that his initial proposal is perfectly modifiable, but it must be done respecting balance. "We cannot modify only in one direction a proposal that needs to maintain together both the objective of financial stability and the objective of promoting investments and growth in a context of economic slowdown," he stressed. "It's going to be a big challenge, but the Spanish presidency is committed. Maybe we can call it the Fiscal Road," said Vice President Valdis Dombrovskis in one of the many puns on pilgrimage and the Camino de Santiago these days.

The problem is maintaining that balance if different countries arrive with their lists of preferences or demands, or if they begin to put pressure on Calviño, who is responsible for trying to move forward, but is also at risk for a highly coveted and well-paid position. "Nothing similar is being proposed in any meeting," the Spanish presidency rules out the possibility of partners who want to condition their support in the EIB to improving their fiscal aspirations. But everything being open only adds problems.

In this competition it is not a question of names, passports or political parties. When choosing the EIB, what the applicants can offer for the future of the institution counts. The four main axes are the position on the financing of green projects, key for Germany. The nuclear vision, vital for France, which wants the EIB to put a lot of money into the main part of its energy mix. The third element is the policy on weapons and ammunition. The Luxembourg-based Bank does not finance anything linked to weapons, but there are partners from the East who demand that this change. And finally, the Ukrainian question. The fifth element, that of fiscal rules, was wanted to be avoided, but no one can guarantee that it will not end up playing a role.