There is an agreement to reform the Stability Pact – Il Post


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On Wednesday, the ministers of economy and finance of the 27 member states of the European Union unanimously approved the draft reform of the Stability Pact, i.e. a set of complex fiscal rules to which all member states are subject. Before entering into force, the reform will have to be discussed and approved by the European Parliament and will in no way affect the spending plans of individual countries for 2024, which have already been approved.

In general, the rules laid down by the Stability Pact serve to ensure that each country keeps its public accounts in order and does not resort too much to debt in order to avoid problems that could affect the rest of the Union. The rules were suspended in spring 2020 due to the Covid-19 pandemic to allow countries to spend billions of euros to help their citizens without excessive restrictions. However, they were not subsequently reintroduced, also due to the start of the war in Ukraine and the resulting energy crisis. The Stability Pact is due to come back into force from 2024, but the need to reform it outside of crisis situations has been debated for some time because it was considered too rigid.

Last April, the European Commission presented a reform proposal, which was subsequently discussed and modified by the Council of the European Union, a body in which the governments of 27 member countries are represented. In short, the proposal provides for simplification of the rules, different treatment depending on the “initial” economic situation of countries and strengthening of the default procedure.

Two parameters already included in the previous version of the Pact and particularly discussed remain unchanged: member states must have public debt below 60 percent of gross domestic product (GDP) and the ratio between the deficit and GDP must not exceed 3 percent. The deficit is the excess of annual expenditure over income.

But the reform allows states with particularly high debt to set up individual spending plans with European authorities for four years, which can be extended up to seven years, allowing them to reduce it and bring it back into line with European standards.

There are general objectives, but they have been toned down from the previous version. For example, countries with a debt-to-GDP ratio above 90 percent will have to reduce it by one percentage point per year for the duration of their spending plan, and by half a point if the ratio is above 60 percent but below 90 percent. percent. This is an important change given that until now the expected reduction was one-twentieth of the excess quota each year: a parameter considered unrealistic and never actually implemented. Furthermore, it will be possible to separate interest expenses from the calculation of public debt, at least until 2027. Special sanctions are foreseen for countries that do not follow the guidelines of their plans.

Italian Economy Minister Giancarlo Giorgetti had threatened to veto the proposal in recent weeks, but then decided to approve it “in the spirit of compromise”. In a press release, Giorgetti he said that there are “some positive things and some less so” in the reform, but he defined the deal as “sustainable” for Italy and said it provided “more realistic rules than those currently in force”. The negotiations were particularly difficult for the Italian government, which had to scale back its demands and demands to meet the demands of more stringent countries in terms of public finances, such as Germany.

Italy is among the European countries with the highest deficits and public debt: according to Eurostat data from 2022, Italy’s public debt was the second highest after Greece, more than 144 percent of GDP, almost two and a half times above the 60 threshold. The deficit-to-GDP ratio is instead equal to 8 percent, which is significantly above the 3 percent limit assumed by the parameters of the Stability Pact: they are followed by Hungary and Romania (with 6.2 percent) and Malta with 5.8 percent.

– Read also: The government scaled back its targets under the Stability Pact


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