Brussels – The EU Council and Parliament\u00a0agreed on new fiscal rules at the end of marathon negotiations that lasted over 12 hours and ended during the\u00a0night. The basic framework does not change: the deal does not touch the numerical thresholds for reducing imbalances, while it ensures more flexibility on investment by excluding national expenditure on the co-financing of EU-funded programs\u200b from deficit and debt calculations.<\/p>\n
Forced reductions, Italy must reduce by 1 percent per year<\/strong><\/p>\n The classic reference thresholds do not change: the 3 percent deficit-to-GDP and the 60 percent debt-to-GDP ceilings remain as\u00a0they are part of the Treaties on the functioning of the EU, but what changes is the way of considering them. To\u00a0ensure fiscal consolidation,\u00a0countries with a debt-to-GDP ratio above 90 percent will have to reduce this ratio by 1 percent annually,<\/strong> while\u00a0those with a deficit\/GDP between 60 percent and 90 percent by 0.5 percent per year. Italy, therefore, will\u00a0have to reduce its debt by one percentage point per year, on a par with Belgium, France, Greece, Portugal, and Spain. The deal confirmed the hard line that Scholz set\u00a0back in the day.Like everyone else, Italy will also have to reduce the deficit because of the other so-called safeguard rule, which involves creating preventive spending margins. The agreement stipulates that even those who do not exceed the 3 percent deficit\/GDP ceiling must still reduce it to create a 1.5 percent buffer in case of a shock without having to put pressure on accounts. 4-7 year <\/strong>reduction plan<\/strong>.<\/p>\n The consolidation period is four years, with plans to be submitted by each member state by September 20, 2024<\/strong>. This reference trajectory\u00a0may, however, be extended to a maximum of seven years upon request by member states. Granting more time to reduce debt is contingent on a plan for reforms and investments to improve growth potential and resilience to shocks. Reforms and investments\u00a0must specifically\u00a0address common EU priorities, namely green and digital transition, energy security, strengthening competitiveness, “and, where necessary, the development of defense capabilities”. In submitting their plans, governments must\u00a0explain <\/strong><\/span><\/span>how investments they will invest in the EU priority areas of climate and digital transitions, energy security, and defense. Even though the main points of the new Stability Pact are the same for all, the reform paths and recommendations will be different and differentiated, tailored to member states according to their respective situations.<\/span><\/p>\n National co-funding not calculated in spending<\/strong><\/p>\n The main new element is the national public expenditure that accompanies the support of EU programs. Whether it is research or cohesion, the EU contributes only partially to the implementation of programs:\u00a0this is co-financing or sharing the costs between the Union and national governments. Under the Council-Parliament agreement,\u00a0national expenditure\u00a0of co-financed\u00a0EU programs will be excluded from a government’s expenditure<\/strong>, creating more\u00a0incentives to invest. It\u00a0was a divisive\u00a0point among parliamentary groups, with the Social Democrats securing this condition of offsetting deficit and debt calculations.<\/p>\n Displacement due to exceptional circumstances<\/strong><\/p>\n