In a twist, the Netherlands and Spain join forces on fiscal rules – POLITICO

LUXEMBOURG – The Dutch and Spanish financial positions are about as far apart as they could be, with The Hague diligently sailing below the EU’s 60 percent debt ratio threshold and Madrid nearly doubling it.

Still, the two countries joined forces on Monday ahead of an ongoing overhaul of EU fiscal rules, seeking an EU-wide consensus in a “frugal North vs. profligate South” debate.

“We have to leave behind the old rifts and the old debates of the past,” Spanish Deputy Prime Minister and Finance Minister Nadia Calviño told POLITICO. “Now is the time to develop a credible and realistic approach based on consensus.”

“This means that our rules have to take into account the fact that the debt-to-GDP ratio in all European countries is very different from what we had before the pandemic hit us,” she said. “Europe needs to make a massive investment effort to ensure our strategic autonomy in this new geopolitical context. That’s a fact.”

“The political point here is that we don’t waste energy and time on superficial differences. Let’s focus on commonalities, let’s build on commonalities,” her Dutch counterpart Sigrid Kaag said at a press conference on Monday.

The debate over fiscal rules has lost some of its urgency since the European Commission signaled earlier this year that it is likely to extend the so-called General Fallback Clause by another year to 2023, meaning countries are failing – and likely violating – current fiscal rules – would need rules for a while longer. But the two think the debate shouldn’t lose momentum.

“Regardless of whether or not the general escape clause is extended to 2023 … it really is high time” to have that debate, Calviño said.

The two countries explained their similarities in a common paper on Monday on the sidelines of a meeting of eurozone finance ministers in Luxembourg. They call on EU countries to define their own path to deleveraging in a way that is “realistic, gradual but ambitious and compatible with economic growth and job creation”. They also recognize that “significant EU and nationally funded public investment will be essential to attract private investment in strategic areas”.

This flexibility should be accompanied by “clear safeguards” to ensure enforcement and “a greater role for independent financial institutions” to ensure countries stay on track.

They also call for “a simple spending rule” that would make rules more understandable and enforceable.

Translated into policy, this would mean giving countries more leeway in the pace of deleveraging and removing the obligation to reduce over-indebtedness by 5 percent per year, against the promise of more consistent and tougher enforcement when countries stray.

What the two countries don’t say is where they differ: whether investments should count when calculating debt and deficits – the so-called “golden rule” being pushed by France and Italy – or whether the “one off” experiment of the EU belongs The joint issuance to fight the pandemic should become something more structural.

Kaag dismissed both in a recent interview with POLITICO, while Calviño spoke of the need to preserve investment while reducing the pandemic’s debt overhang.

“We from the Netherlands don’t believe that the risks associated with the kind of off-budget types of investments where there may not be the same definitional priority or burden…is the smartest way to do it,” Kaag said.

But there will be time for disagreements.

“The starting point must be those elements on which there is a broad consensus,” said Calviño. “The next step should be a proposal from the Commission. And we can have that discussion and look at the different options based on that proposal.” In a twist, the Netherlands and Spain join forces on fiscal rules – POLITICO

Fry Electronics Team

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