PARIS AND BRUSSELS ― France and Germany said they are confident that last-ditch talks on an overhaul of the EU’s public spending rules will result in a deal ― despite lingering disagreement between the bloc’s biggest governments.
On the eve of a virtual meeting of all 27 finance ministers on Wednesday, France’s Bruno Le Maire and his German counterpart, Christian Lindner, said they hoped to wrap up a compromise in the hours that followed, which would pave the way for looser targets allowing countries to be given more time to rein in spending.
Their dinner in Paris on Tuesday night came after a day of back-and-forth between Brussels and EU capitals that at one point left diplomats believing that negotiations were about to collapse. The ambition had always been to find agreement before the end of the year.
“I am sure we will have a deal tonight,” Le Maire said before Tuesday’s talks. Standing next to him, Lindner clarified the word should be “solution” rather than “deal”, signaling the extent to which this compromise may be a typical EU fudge that could still have some twists to come.
Two EU officials said they were still skeptical of a bloc-wide agreement. After the dinner, Le Maire and Lindner were in 100 percent agreement on the text between themselves, Agence France-Presse reported.
The so-called Stability and Growth Pact (SGP) was put on hold at the start of the COVID-19 pandemic to allow governments to increase spending in the wake of the worst recession since World War II. As it gets reintroduced, the European Commission proposed a reform because of concerns that the rules were too inflexible and unenforceable.
The overhaul is designed to offer more gradual and tailored spending cuts for countries exceeding the EU’s threshold of 3 percent deficit-to-GDP and 60 percent debt-to-GDP. That’s pleased countries such as Italy and France that have run up big debts and are struggling to gain control of their annual deficits ― the difference between how much governments spend and bring in ― but dismayed stricter capitals like Berlin who wanted tougher and more uniform targets.
Under the compromise highly indebted countries would have to keep their annual deficits at about 1.5 percent of GDP and reduce debt by at least 1 percent of their GDP every year.
Italy on board
While that’s resulted in what looks like an uneasy truce, it appears to be one everyone can get along with.
“It’s now possible in the next few hours to have an agreement,” Lindner said before his dinner with Le Maire.
Italy, the last major holdout, is now on board with a deal, according to the French finance minister.
They are not there yet though. “We really want all member states to feel the pressure that is it is crunch time for an agreement.” said an EU diplomat.
Remaining disagreement is focusing on two figures connected to spending targets, said the diplomat.
Paris and Rome were particularly concerned about Germany’s insistence on tougher targets because they are two of nine governments whose deficits are above the 3 percent limit. The Commission is expected to slap these countries with its sanctions mechanism ― known as the excessive deficit procedure (EDP) ― in spring 2024.
Double-act
That might explain why a deal had looked shaky even as late as Tuesday evening when diplomats in Brussels were privately discussing the prospect of the negotiations being “frozen”. That would have allowed finance ministers to reconvene in January but allow legislative talks with the European Parliament to begin on only a limited agreement.
But they appear to have been blindsided by the Le Maire-Lindner double-act ― itself something that other countries have grumbled about ― or the two finance ministers hope their show of unity can force through an agreement among all 27 on Wednesday.
A deal would then have to be found with the Parliament before it breaks up for June’s election.
