This is Brussels' new plan for the debt-ridden states

A reform of the debt rules for the euro zone has been discussed in Brussels for years. WELT now has a draft of the Commission proposal. The core of the reform are new, individually negotiated debt reduction plans for each individual country.

"National medium-term fiscal-structural plans that bring together the fiscal, reform and investment commitments of individual member states within a common EU framework would be the cornerstone of the proposed revised framework," says the communication paper.

A reform of the rules is intended to prevent almost all countries in the monetary union from violating the debt rules when the Maastricht criteria, which have been suspended in the meantime, come into force again at the beginning of 2024 as planned. On Wednesday, Economics Commissioner Paolo Gentiloni and Commission Vice-President Valdis Dombrovskis, who is responsible for economic issues, want to present how they envisage such a reform of the debt rules. Details of the document may change before publication.

The central brands of the Maastricht Treaty should remain untouched: "The reference values ​​specified in the treaty of a budget deficit of three percent of gross domestic product (GDP) and a debt ratio of 60 percent of GDP remain unchanged," it says right at the beginning of the remarks. Fiscally conservative countries like Austria and Germany had insisted on this.

"Member States would present medium-term plans setting country-specific fiscal targets, priority public investments and reform commitments that together ensure sustainable and gradual debt reduction and sustainable and inclusive growth," the paper said. The Commission wants to give highly indebted countries more time to reduce their debts. In addition, the countries should be given more autonomy in reducing debt instead of just reacting to savings targets and deficit procedures from Brussels.

The authority is based to a certain extent on the Corona reconstruction fund. In order to get the money from the around 800 billion euro program, the member states also had to present plans for reforms and investments, which they had developed in sometimes less close coordination with the Commission.

For countries with a debt of more than 60 percent, however, the autonomy now planned is limited: the Commission would give these countries a debt reduction path for at least four years. A reduction path for the next ten years is also to be defined for them. On this point, fiscally conservative commissioners such as Dombrovskis and Johannes Hahn have apparently prevailed in the commission.

The Commission wants to differentiate between the degree of indebtedness and divides the countries into three groups: fiscally unproblematic countries that have debts of less than 60 percent of gross domestic product, those with debts between 60 and 90 percent, and those with high debts of more than 90 percent. The debt reduction path should correspond to the level of indebtedness.

However, the governments concerned can request that they be given more time to reduce their debt. "Member States could propose a more gradual adjustment path, provided that this more gradual path is underpinned by a set of prioritized reform and investment commitments," reads the Commission paper. In principle, however, the countries should commit themselves to complying with the target of a maximum of three percent of new debt per year in the medium term.

The Commission and the other Member States have to agree on the national plans with the debt reduction paths, the reforms and the investments. Once approved, the plan can be changed after four years at the earliest. "Frequent revisions would undermine the credibility of the plans as an anchor for prudent politics." However, exceptions should be possible.

The Commission's paper is not a legislative proposal, but a so-called communication. With its proposal, Ursula von der Leyen's authority wants to provide a discussion template for the member states. A concrete legislative proposal should only follow when the discussion between the member states has progressed further - even if the national governments have been discussing the topic for two years.

The unusually cautious approach has a background: the authority has already failed with a reform proposal because the member states could not agree. The officials apparently want to avoid such a defeat this time.

The EU has proposed a new package to bring down energy prices. Central components of the package are the joint purchase of natural gas and a dynamic gas price cap for purchases on Europe's largest gas exchange, as Commission President Ursula von der Leyen explained in Brussels.

Source: WORLD

The European Commission has been wanting to revise the rules of the pact for some time because the set of rules has become too confusing in recent years and many critics believe it has never worked properly anyway.

However, the permanent crisis mode of the past few years and the expensive aid programs in the corona and energy crisis have turned the desire for reform into an obligation to reform.

In spring, the EU Commission predicted that only three countries would still comply with the two central rules of the Stability and Growth Pact. They are suspended until the end of 2023. Only Ireland, the Netherlands and rich Luxembourg should make it this year.

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