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27th Feb 2021

Handful of questions remain on EU fiscal treaty

  • EU finance ministers will look at the fourth draft of the fiscal compact next week (Photo: Council of the European Union)

Finance ministers will next week tackle the thorny little details still to be agreed before EU countries can bless a new pact on fiscal discipline.

A fourth draft of the slim document - meant to copperfasten budgetary prudence in the EU - is to be circulated on Thursday (19 January), but most of the outstanding issues have been left for finance ministers to sort out in the hope the pact will be ready in time for an end-of-the-month EU summit.

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One open question is determining the link between the permanent bail-out fund (the ESM) and the new intergovernmental pact. Germany - the main driver behind the treaty - is keen to have the intergovernmental agreement say only countries that have ratified it will be permitted to make use of the fund.

But according to an account on Monday evening (16 January) by Italian Socialist MEP Roberto Gualtieri - one of the European Parliament's observers at the negotiating table - other countries fear this would once again create uncertainty in the markets.

Finance ministers also have to decide whether to introduce sanctions for countries that breach the budget deficit rules. The current draft says member states can bring one another to court for such breaches or ask the European Commission to draw up a report on the fiscal miscreant.

Also open is how many euro countries need to ratify the treaty before it enters into force. The number has yo-yoed from the initial suggestion of nine, then to 15 and then back to 12. Germany wants a high number so that all struggling eurozone countries get on board.

On top of this, there is disagreement about wording in an article on economic policy co-ordination (Article 9). Opposing camps differ on whether to make mention of growth-enhancing measures and if so, on the nature of the reference.

Member states are also at odds on future eurozone summitry. An eternal question in EU politics, it concerns who has a right to be in the inner circle. Wording on the role of the European Parliament, the president of the European Commission and non-euro states still needs to be finalised.

"It's a very important point which has been left open," Gualtieri noted at an EU parliament hearing on Monday.

MEPs will be looking for the fourth draft to mention eurobonds in the introduction to the document - EU deputies are keen on the idea of mutualising eurozone debt, but it is fiercely opposed by Germany.

"There is a proposal by the commission - if it is accepted - of making reference in the recital of a path toward stability bonds. This would be at least an improvement in respect of a text that [is] only concentrated on fiscal stability without anything on growth and solidarity," Gualtieri added.

After the EU finance minister's meeting - on 24 January - member state delegates, or "sherpas", are to have one more meeting before EU leaders gather for the summit on 30 January.

EU leaders aim to announce a political agreement on the treaty next week and to sign the text at the March EU summit. With markets in recent months making EU decisions obsolete shortly after they are made, the ratification process is expected to last about one year.

Correction - The article previously said Roberto Gualtieri asked MEPs to endorse the pact. It should have said that Gualtieri asked them to endorse the amendments suggested by the three MEPs involved in negotiating the pact.

Softer draft of fiscal treaty opens door for UK

Less stringent constitutional demands, a weaker role for the EU commission and a provision allowing the UK to join at a later stage are among the most recent changes to the draft treaty on fiscal discipline.

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