EU finance ministers ended their meeting without agreeing on new budget rules

The EU’s Economic and Finance Ministers (Ecofin) meeting on new budget rules ended this morning without agreement, but will resume contacts today.

Despite the progress, there were no signs of an agreement in the next few hours.

Ministers are discussing the reform of budget rules, debt and deficit ceilings, but they are still “very far” from an agreement, according to information provided to the Lusa agency by several European sources close to the negotiations.

Organized by the Spanish Presidency of the Council of the European Union, this informal dinner aimed to find a consensus among the finance ministers of the 27 member states on the reform of the economic governance framework in view of Spain’s minimum average debt. A reduction of at least 1% per annum for countries with a debt ratio above 90% of GDP and 0.5% for those between the 60% ceiling of GDP.

Spain’s proposal also preserves the objective of reducing the deficit to 1.5% as a safety margin, even if the general account deficit remains below the ceiling of 3% of GDP.

The demands were imposed by a group of ‘extremely austere’ countries led by Germany, which has always called for quantitative easing targets, but is opposed by countries such as Italy, which are demanding more flexibility, according to European sources.

France, for its part, allows countries involved in investments and reforms to reduce structural adjustment from 0.5% to 0.3% of GDP, but according to the same sources, Paris’ recommendation was not well received by Berlin.

On Thursday, Finance Minister Fernando Medina said “further steps are necessary” for an agreement in the EU on new budget rules, admitting there is still no consensus.

Given the European elections in June 2024, it is certain that this document should already be ‘closed’, giving the necessary time for co-legislative (Council and European Parliament) negotiations.

The debate comes as these budget rules are expected to resume next year after being suspended due to the Covid-19 pandemic and the war in Ukraine, despite the usual ceilings of 60% and 3% of GDP for public debt. GDP for the deficit.

Portugal defends the introduction of a counter-cyclical nature in this reform, so that, in periods of high economic growth, countries make greater efforts to reduce public debt, and instead have slower rates of reduction in periods of high GDP.

The debate is based on a European Commission proposal published last April for risk-based financing rules, with a technical and customized path for indebted EU countries like Portugal, giving them more time to reduce deficits and debt.