27th Feb 2021

No consensus on sanctions under fiscal pact, says Denmark

  • A banner protesting the fiscal compact (Photo: Valentina Pop)

Two issues are to extend discussions on the new fiscal treaty beyond the finance ministers' meeting on Monday (23 January): financial sanctions and the participation of non-euro members in eurozone summits, the Danish economy minister told this website.

"We support the participation of non-euro countries in the eurozone summits. It is one of the questions that will be worked on in the last week before the meeting of heads of state on 30 January," said Margrethe Vestager, who chairs the meeting of 27 finance ministers on behalf of the Danish EU presidency.

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The issue has become a make-or-break deal for Poland, whose prime minister has threatened not to sign up to the new inter-governmental treaty on fiscal discipline unless the so-called 'outs' are allowed to attend the eurozone summits. In the latest text, a concession has been made allowing leaders from these countries to be invited "in order to discuss specific issues concerning the implementation of this treaty," "when appropriate and at least once a year."

But Vestager remains sceptical this wording will be enough. "It is a sensitive question, if countries that are now outside the euro but may become part of the eurozone in the years to come, it's in their obvious interest to participate in meetings where these issues will be discussed," she said.

Poland is not the only country to make this claim, she noted, just "the most vocal ambassador."

"We have stated the same in the negotiations," Vestager said, even though her country, unlike the other eight 'outs' that have signed up to the fiscal treaty, is under no legal obligation to join the euro.

The other thorny issue likely to remain unsettled before the EU leaders' meeting next Monday is the controversial idea of having the European Court of Justice impose fines of up to 0.1 percent of a country's gross domestic product if it doesn't properly apply the so-called balanced budget rule into national law, prohibiting a structural deficit of more than 0.5 percent of GDP.

In the latest draft, this fine would be transferred directly to the European Stability Mechanism, the eurozone's permanent bail-out fund to be created this summer.

"This is a proposal on which there is no consensus yet.  From a strictly Danish point of view, it's hard to see your fines going to the ESM, which is a eurozone fine-box. In that respect, there is a special Danish issue, but I think this will be debated in the days to come, not only tonight," Vestager said.

To the Danish Liberal, the mere fact that leaders from 26 EU countries - except Britain - have agreed to enshrine the balanced budget rule in their binding national legislation is enough of a "token of appreciation" that they are committed to this new approach in public finances.

The fiscally disciplined Scandinavian country supports this new treaty - essentially a German pre-condition for future eurozone bail-outs - as a measure to boost market confidence in the soundness of state budgets.

"We need not only the markets, but also businesses and citizens to trust our fiscal policies. That is our most important thing. It's one of the Danish EU presidency's high priorities to make sure that the implementation of the economic reform is going well and remains very focused," she said.

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