The organization considers that it is more effective for the states themselves to decide their level of debt in the medium term and for Brussels to approve and monitor compliance, but without sanctions
Brussels will decide in the coming days what will be its proposal to reform the fiscal governance framework of the eurozone. And the Fiscal Authority (Airef) has presented this Friday what its own proposal is, which it has already presented to the Commission, based on medium-term spending objectives with which the different governments commit themselves for their entire legislature.
In this way, the published technical document proposes that each incoming government establish a specific debt anchor for its country at the beginning of its mandate and commit to a spending path derived from it for its entire legislature. This path must be approved by Congress and by the European Commission and would be the binding reference for the following four years.
This proposal is realistic for a country like Spain because there are already others that do it, as is the case in the Netherlands, according to Airef sources. They recognize, however, that the public debt in the Spanish economy has reached record levels in times of peace, so it is "essential" to design a medium- and long-term fiscal policy strategy that generates room for maneuver to face future economic challenges and disturbances, the document indicates.
In his opinion, the European fiscal framework after the modifications that were introduced with the 2008 crisis has not been enough to design stable and predictable national fiscal policies. On the contrary, fiscal policies have been procyclical in nature and have led to a progressive increase in public debt ratios to values that increase the vulnerability of economies to possible changes in market perception that could put stability at risk.
Currently the fiscal objectives are set for three years but then they are modified each year, so there is really no medium-term fiscal policy. In this sense, the proposal for a debt anchor would be specific for each country, taking into account the starting level, where revenues and expenses would go if there were no measures, and information on how the debt has reacted to shocks at other times.
Of course, the path could be modified in exceptional circumstances by activating an escape clause. Thus, it would have the necessary flexibility in the face of a change of government or if exceptional economic circumstances arise.
In addition, it would be necessary to evaluate year after year whether the spending limit has been met and how much has been executed. If a big mistake is detected, the European Commission would come in to analyze the situation, although from Airef they consider that the economic sanctions are not effective and are never applied.
Next week or the following week, the European Commission is expected to make a proposal on the reform of the rules of the Stability and Growth Pact that limit the public deficit and debt of the Member States and that were deactivated by the pandemic and still continue suspended due to the economic impact of the war in Ukraine and the rise in prices.