THE EU PARLIAMENT and member states reached an agreement in the early hours of this morning on reforms to EU budgetary rules.

The reforms are aimed at increasing investment while keeping spending under control.

The text updates the current rules, known as the Stability and Growth Pact, that were created in the late 1990s to limit countries’ debt to 60% of gross domestic product and public deficits to 3%.

The EU spent two years trying to develop reforms supported both by more frugal member states like Germany and other countries, such as France and Italy, that wanted more flexibility.

With war raging in Europe and the EU making a green transition push, states led by France argued for allowing more space to finance key areas, including, for example, supplying arms to Ukraine. 

After much wrangling between Berlin and Paris, the 27 member states struck a deal in December and then began talks with negotiators from the European Parliament.

The text has been criticised for its complexity and by left-wing officials, who feel it is a tool for imposing austerity on Europe.

Negotiators finally reached an agreement early today in time for the text to be voted on in Strasbourg this spring before the parliamentary break ahead of European elections.

The agreement will allow member states to apply the new rules to their 2025 budgets.

The Belgian presidency of the EU Council said: “The new rules will help achieve balanced and sustainable public finances, structural reforms, foster investments, growth and jobs creation in the EU.”

While confirming the previous limits on debt and budget deficits, the new agreement allows more flexibility in the event of excessive deficits.

“We have ensured that the new fiscal rules are sound and credible, while also allowing room for necessary investments,” said Dutch MEP Esther de Lange, of the centre-right European People’s Party Group.

The reforms are also supported by the Renew liberals and a large majority of the Socialist and Democrat groupings.

The Greens and some S&D elected officials, however, reject it, as do the radical left.

These elected officials have denounced a return to austerity after three years of suspended budgetary rules due to the pandemic and war in Ukraine.

“We need investments in industry, in defence, in the ecological transition, that’s the urgency today, it is not to bring economically absurd rules up to date,” economist and S&D MEP Aurore Lalucq of France told AFP.

She called it as a “political error which will be used by populists to attack Europe”.

© AFP 2024