In a historic turn of events in economic policy, the European Union unanimously approves the new Stability Pact. Initially criticized, Italy eventually embraces the “spirit of compromise,” concluding the meeting and marking a milestone in the continent’s economic history.
Stability Pact: Italy’s stance and the historic compromise
Italian Minister of Economy Giancarlo Giorgetti commends the compromise as a common-sense approach, highlighting improvements compared to the past. Prime Minister Giorgia Meloni welcomes the news as a victory for common sense but expresses regret over Europe’s rejection of the golden rule on investments. EU Commissioner for Economic Affairs Paolo Gentiloni declares that the new Pact is good news for the European economy.
Contents of the new Stability Pact: a complex breakthrough
The Stability Pact, a result of the Franco-German arbitration, aims to maintain strict fiscal sustainability and balance growth by considering investments and debt interests in the three-year transitional period from 2025 to 2027.
The structural deficit reduction path entails an annual 0.5% for countries like Italy, but the correction speed may vary. A last-minute innovation allows governments to agree on a technical trajectory with the Commission, similar to the model used with the National Recovery and Resilience Plan (Pnrr).
Key elements of the agreement and international voices
Berlin secures a lifeline, obliging countries below 3% to reach 1.5% of GDP deficit. For those with a debt exceeding 90%, an exit strategy is outlined by reducing the deficit by 0.25% annually over seven years.
Paris, Madrid, and Berlin praise the agreement as historic, with the new rules deemed realistic and balanced. The Netherlands speaks of a Pact for “sustainable debt” and emphasizes the importance of rules.
“Italy was decisive,” says Paolo Gentiloni, highlighting the country’s key role in the decision-making process. In a chilly pre-Christmas afternoon, Giorgetti faced a crucial crossroads, ultimately opting for compromise, setting Italy apart from the 27 and resisting pressure from France, Germany, and Brussels. “Giorgetti showed he’s not Orban,” observed a European diplomatic source.
Next steps and Brussels’ objective
The Ecofin agreement doesn’t conclude the matter: in January, the European Parliament will approve the negotiating position, initiating trilogues between the Council, Commission, and Euro Parliament. The EU Commission aims to finalize the Pact by April.
What the new Stability and Growth Pact rules entail and when they take effect
EU Finance Ministers have agreed on the new Stability and Growth Pact, incorporating a flexible timeframe while adhering to Maastricht parameters. The agreement will come into force in 2024 following the evaluation by the European Parliament.
Respecting the original Commission framework, the new regulatory framework introduces a transitional period until 2027 with increased flexibility. Objectives include a gradual debt reduction, investments, and reforms agreed upon with Brussels.
Minister Giorgetti welcomes the agreement as sustainable, aiming for a realistic debt reduction and promoting Pnrr investments.
In summary: new rules and growth prospects
In summary, the new Pact involves multi-year negotiations to balance recovery and investments, ensuring flexibility between 2025 and 2027. Heavily indebted states must reduce debt, with the new deficit target set at 1.5%, providing maneuverability in case of economic shocks. Italy positions itself as a protagonist in defining a compromise promising a new era of economic stability and growth for the European Union.