As published on: worldnationnews.com, Monday 12 February, 2024.
The Council and the European Parliament reached an agreement on the reform of the EU tax rules which, after four years of being frozen by the pandemicwill again limit the debt and deficit of the Member States, although in a more flexible way and adapted to the situation of each country, Europa Press reports.
After 16 hours of negotiations, the co-legislators closed a political agreement on the preventive component of the economic governance framework that This is still subject to formal approval from both institutions and, once adopted, the text will be published in the Official Journal of the EU to enter into force the following day.
The other two files in which the reform was carried out, the regulation of the corrective component and the directive on the requirements for the budgetary frameworks of the Member States, they only need to consult the European Parliament.
Therefore, the Council and Parliament agreed to continue the general goal of the reform to reduce debt ratios and deficits in a way. slow, realistic, sustainable and growth friendly, while protecting reforms and investments in strategic areas such as digital, green, social or defense. At the same time, the new framework will provide a enough room for countercyclical policies and respond to macroeconomic imbalances.
The agreement also maintains the obligation that the capitals of presented the medium-term national fiscal structural plans and each Member State must present the first national plans before September 20, 2024. The Commission, for its part, will present a ‘reference path’ (previously called ‘technical path’) to countries where public debt exceeds 60% of gross domestic product (GDP) or if the public deficit exceeds 3% of GDP. The provisional agreement provides for an optional and genuine first dialogue between the Member States and the Commission.
The baseline shows how the Member States can ensure that At the end of the four-year fiscal adjustment period, public debt is on a downward trajectory credible or remains at a cautious level in the medium term.
In addition, a Member State may request the submission of a revised national plan if there are objective circumstances that prevent its implementation, even if there is a change of government. Based on the reference path, EU countries include the fiscal adjustment path, expressed as net spending paths, to their medium-term national fiscal structural plans, which must be approved by the Council. The agreement establishes that a control account will record deviations from country-specific net spending trajectories.
The new rules will further encourage structural reforms and public investments for sustainability and growth and Member States can requesting an extension of the fiscal adjustment period from four years to a maximum of seven years, if they carry out some reforms and investments that improve stability and growth potential and support fiscal sustainability and respond to common EU priorities. This includes achieve a fair, ecological and digital transitionguaranteeing energy security, strengthening social and economic stability and, if necessary, developing defense capabilities.
Countries with excessive debt will be subject to protection rules that will require them, among other things, reduce your debt by an average of 1% per year if it exceeds 90% of GDPand 0.5% per year on average if your debt is between 60% and 90% of GDP, provisions less restrictive than the current requirement which requires that each country must reduce the debt every year by 1/20 of the surplus above 60%.
If a country’s deficit exceeds 3% of GDP, the it will be reduced during the growth period until it reaches the level of 1.5% of GDP, to create a spending cushion for difficult economic conditions. Other numerical benchmarks of how much the deficit should be reduced each year are also available.
A country with too much debt not obliged to reduce it to less than 60% at the end of the plan years period, but must have debt that is considered “on a plausible downward trajectory.”