Saturday, May 28

Spain and the Netherlands ask for “realistic” and “country-specific” budget rules

One is a liberal and a champion of the self-styled frugal. The other is a progressive and southern coalition government. The Hague and Madrid; Mark Rutte and Pedro Sanchez. Indeed, the Netherlands and Spain, countries historically at odds in the European Union due to their different ways of seeing the economic responses to each and every one of the crises –the financial one of 2008; that of the pandemic; that of the energy crisis – have now agreed on a non paper, a document in which they set out their position on an open debate in the EU: the reform of fiscal rules, budgetary rules, which suspended for two years due to the coronavirus health, economic and social crisis.

This Monday the finance ministers of the euro, the Eurogroup, and Spain and the Netherlands meet in Luxembourg to present a document, the content of which has been advanced by the country and Politician, in which they try to combine flexibilities defended by the south together with the austerity defended by the north.

Thus, according to the published draft, Madrid and The Hague defend that “in a context of higher levels of debt” more “specific for each country” and “realistic” consolidation strategies are needed. The Spanish Nadia Calviño and the Dutch Sigrid Kaag will present a document on Monday with the proposals to change the set of rules that govern how EU countries must reduce their debt and in which they are committed to the EU setting specific objectives for each country .

Currently, fiscal rules dictate a rate of debt reduction of 1/20 per year, which has served to impose fiscal cuts and sacrifices in the past. As many EU countries now have debts in excess of 100% of GDP, going back to the 60% target at that speed would mean brutal budget cuts, sending countries like Spain into new recessions.

In this context, Spain and the Netherlands agree to modify that reference point. Of course, in a gesture from the north, the document defends building fiscal buffers “to be prepared for the next shock” and greater room for maneuver for stability programs designed at the national level.

Madrid and The Hague argue that “high-quality public investments” and “considerable investment efforts” are needed to meet green and digital ambitions, which would point, according to Politicobecause investment should be treated differently from other expenditures in deficit calculations.