On Tuesday, the European Commission will launch a public consultation on the post-covid era's development of tax regulations in Europe.
On Tuesday, the European Commission will launch a public consultation on the post-covid era's development of tax regulations in Europe. It's about allowing for some flexibility when it comes to authorizing future investments, recognizing that the Twenty-Seven have quite diverse perspectives.
This time, we're going to go right to the point. The European Commission will reopen an official consultation on the reform of the Stability Pact on Tuesday, one of the year's most important concerns. It began this effort in early 2020 and, understandably, had to halt it due to the epidemic.
The arguments are expected to be vigorous between Member States that want to be free to spend substantially in green energy and digital without constraint and those who want to maintain a clear framework in order to consolidate a public debt, as we saw in September. It has risen substantially as a result of the epidemic. By the end of 2021, Brussels anticipates the euro zone to have a debt ratio of over 102.4 percent of GDP, with certain member states much above this average: Greece has a debt ratio of 209 percent, while Italy has a debt ratio of 160 percent.
Knowing how delicate the topic is, Valdis Dombrovskis, Vice-President of the Commission, and Paolo Gentiloni, Commissioner for the Economy, want to tackle it carefully. They intend to start by sketching a vision of the economy after the conclusion of the epidemic and learning from the European Recovery Plan, which was enacted in July 2020. In this regard, the Member States have presented national plans, which have been accepted in the vast majority of cases.
Then, since the epidemic has hastened the digitalization of the economy and global warming has deteriorated, as the IPCC experts verified last summer, Brussels wants to begin a discussion on the tax regulations that the EU wants to implement in the next years.
Some Member States, such as France, have already declared the present regulations to be outmoded and have asked for future investments to be treated separately, as well as a customized approach that takes national specificities into consideration. The requirement that a country with debt exceeding 60% must reduce the gap between the total debt and the value of 60% by one twentieth every year (on average over three years) no longer makes sense to them.
There is a step from there to establishing a distinct "Ã la carte stability agreement" for each nation that many capitals will not want to take. They argue that we must adhere to the concept of equitable treatment and link future expenditures to structural improvements that improve competitiveness.
The Commission should not propose a specific timeline in order to enable itself the flexibility to adjust to the speed of negotiations between Member States, which will begin at the level of finance ministers but may eventually reach the level of heads of state and government. Nonetheless, the presentation of Brussels' budget recommendations to member states in the spring will be a big event, as the accord will re-enter effect in 2023, the year after it was suspended due to Covid.
It has been confirmed that the ultimate outcome will not be a change to the EU Treaty. It's debatable whether secondary laws should be changed at all (which would require, at least on certain points, unanimity at Ecofin). We might be "satisfied" with outlining the pact's interpretive standards.
The form of member-state disputes will, of course, be determined by the identity of Germany's finance minister and the text of the Berlin-signed coalition agreement. The Greens, Liberals, and Social Democrats achieved a preliminary agreement on Friday, calling for "strong and secure" European finances and stating that the accord had "demonstrated its flexibility" in its current form. The stance of the Netherlands, which has previously positioned itself as a leader of the so-called "frugal" countries, will be crucial, especially because Prime Minister Mark Rutte, who is in charge of current affairs, appears to be on the verge of establishing a full-fledged administration.