The governments of France and Germany already have at least one proposal to recover fiscal discipline within the European Union that can satisfy both parties. Berlin and Paris lead two opposing blocs in the main debate of the course in the EU. The proposal has been put on the table by Luis Garicano, economic spokesman for Renew in the European Parliament and party colleague in the Liberal group of finance ministers of both countries.
The European Commission has already asked the Member States to start withdraw exceptional aid imposed during the pandemic. The European Central Bank is warning that in April the indiscriminate public debt purchase program. And several countries have demanded the acceleration of the fiscal consolidation plans that the Executives must present to return to fiscal rules, lifted until 2023.
The “another way out of the crisis” that the Spanish government has promoted is coming to an end. The support of the social democrat Olaf Scholz, then Minister of Finance and today Chancellor of Germany, has changed. 20 months ago opted for the joint assumption of European public debt to create recovery funds, and now he advocates the opposite of what he asks Pedro Sanchez, to which he denied his support so that the 70,000 million in credits that Spain must request between 2024 and 2026 are not counted as debt.
The Finance Minister of the new German Executive is Christian Lindner, a hawk of orthodoxy. The French headline is Bruno the Mayor, which advocates “the relaxation of fiscal rules”. At his side, France has Italy. But next to Germany are the frugales and the European Commission itself, concerned about the lack of control of inflation and that the doping of the economy goes on too long and “distorts” the accounts.
Garicano’s plan, to which this newspaper has had access, aims to satisfy both parties. It proposes the creation of two new institutions. On the one hand, a European Climate Investment Fund (ECIF, for its acronym in English), to guarantee the huge amounts of money necessary to comply with the “neutrality in emissions” committed for 2050. And on the other, a Independent European Tax Agency (EFA), in the image and likeness of the Spanish AIReF.
In the proposal of the Ciudadanos MEP, this institution would be in charge of evaluating and certifying the fulfillment of the Member States of their necessary milestones for their fiscal consolidation “via a spending rule”.
The fact that such a body does not exist at European level is striking, because It was the Commission that forced the Government of Mariano Rajoy to promote AIReF at the time, as a guarantor of orthodoxy in the Spanish public accounts, during the financial crisis of the last decade.
It would be the endorsement of the EFA that would give the Governments of each State access to this investment mechanism, in the form of soft loans, financed with pooled debt.
According to the calculations of the document, in the next decade the Twenty-seven will have to invest an average of 57,000 million euros per year to meet climate commitments “and a transformative project of this magnitude is not only good and necessary, but also very expensive.”
“More carrot than stick”
The virtuality of Garicano’s proposal is that the Orthodox would see safeguarded fiscal rules as they are, “also with incentives for countries to comply.” And that those who ask for more time or relaxation of the rules “would have access to extra financing for investments that they will have to address in any case”, with the lure of rigor in public accounts as a boost.
In the words of the Liberal MEP himself, it is a plan that “looks more at the carrot than at the stick”. And that also “does not require any legislative change or treaties.” Furthermore, it is “perfectly viable” because it relies on “instruments already created, such as the issuance of common debt” and the stability pact itself, which countries such as France, Italy and Spain are now calling into question.
Paris and Berlin are the main hub of the European Union. Nothing progresses without the agreement of the two main countries politically or economically. And when the two are at odds, the EU must slow down and wait for them to come to an agreement. That is exactly what is happening right now with respect to fiscal rules.
France wants more time, more relaxation and a redesign of the stability pact. Germany leads a movement of countries frugales calling for fiscal consolidation plans, withdrawal of stimuli and a return to Cartesianism of a maximum 3% deficit and a ceiling of 60% of public debt over GDP. Spain, for its part, asks that there be no blocks, but “inclusive and silent work”.
This Tuesday, the Ecofin, the Council of Finance Ministers of the Twenty-seven, met in Brussels. As on all these occasions, before the official meeting, the portfolio holders held informal meetings with the leaders of their respective parties. French ministers, Bruno Le Maire, and the German, Christian Lindner, both belong to the group of liberals. And Renew’s economic spokesman in the European Parliament is Luis Garicano, an economist, university professor and head of list of Citizens.
Garicano’s proposal is, at the moment, “his personal and initial position,” sources from Ciudadanos in Brussels explain. But Le Maire and Lindner “have agreed on the need to seek an alternative to overcome the blockage in which we find ourselves”.
In the coming weeks, both French and German ministers will be in contact with Garicano to try to “propose a common position for the Liberals.”
A light for Sanchez
The proposal would also satisfy the Spanish government of Pedro Sánchez, whose meeting with Olaf Scholz in Madrid went wrong. Not the meeting itself, in which both reaffirmed their good political harmony and their personal friendship, but the message that Moncloa wanted to send about “the inauguration of a new stage of relations” between Spain and Germany, based on “a Madrid axis -Berlin” as a result of “the shared vision of the European Union and the way out of the crisis caused by Covid”.
On the steps of the palace, in front of the microphone, as soon as he began to speak, the new foreign minister made clear his “discrepancies” with the Spanish president regarding fiscal rules.
Berlin is clear that “the stability pact” must be recovered, and that this has been the instrument “that allowed guaranteeing the creation of the recovery tool” of European funds Next Generation EU. Moreover, Scholz explicitly stated that “stability is the path that will allow us to succeed in the future.”
Now, within the European Liberal Party Garicano’s plan opens a light, also for Spain, on which the finance ministers of the two main EU countries, currently facing each other, are going to work together.
“It simply came to our notice then putting the French, Dutch and Germans in agreement would put the debate on the right track“, explain the sources of Cs. “The reform of the fiscal rules is one of the priorities of the French for their presidency of the EU” and a key element for the new Germans in their message to Europe.
The next Ecofin meeting is on February 25 in Paris. It has a month to keep advancing. But there is already a document to work on.