Punctual, with the end of the summer break and the resumption of political activity, the now ritual debate on the next budget law and relative maneuver. The Prime Minister and at least two important Ministers, such as Giorgetti and Fitto, have invited the caution, recalled that the margins are reduced, and confirmed the willingness to respect budgetary constraints with messages clearly directed first and foremost to the political leaders of the coalition and to the other members of the government. But the game has just begun and it seems difficult for the majority parties to give up making requests for measures and interventions to be included in the budget, to protect their respective constituenciesin an atmosphere of the beginning of the electoral campaign for the European elections.
The timing for the presentation of the budget law for 2024 are those envisaged by the current (and currently in force) European rules. By the end of September, the government will have to present the Update note of the Economic and Financial Document (NADEF); by mid-October he will have to submit to the European Commission a first draft of financial law; from that date the Commission will be able to formulate its observations; the government will have to decide whether and which observations to implement and then present the bill to Parliament, thus starting the complex approval process which will have to take place by the end of the year.
Reform of the Stability Pact: a complex path
However, this year the discussion of the finance law will coincide with the final phase of the negotiations on the reform of the current European rules on budgetary discipline (il Stability pact). The ongoing negotiations in Brussels are complex and divisive. And it is currently difficult to predict how and when it will end. But one thing is certain. There suspension of European rules (decided at the time to allow for expansionary national fiscal policies to counter the 2020 recession) will expire at the end of the year. And if an agreement cannot be found among the 27 on new rules, the old ones (with the relative critical issues) will come back into force for the 2024 budget.
The reform of the Stability Pact is being negotiated on the basis of a proposal from the Commission, which aimed to update the old rules to make them more effective and more credible, and to ensure greater room for maneuver to finance public investments (in support of energy and digital transitions), albeit within a framework of progressive reduction of the public debt.
The most qualifying aspect of the proposal is the transition from a system of rules and objectives that are in principle the same for everyone (except for the flexibility experimented over the years) to a system that provides for debt reduction paths negotiated between the Commission and individual governments based on some shared goals. The Commission will define a general framework and “technical trajectories” of debt reduction for each country, and the governments will negotiate with the Commission “national structural budget plans”.
These national plans will have to contain the budget balance forecastbut also the necessary measures to address possible macro-economic imbalances, and the reforms they investments necessary to guarantee objectives defined at European level. These plans will have to be approved by the Commission and validated by the Council, and will have a duration of four years, which can be extended up to seven, at the request of the country concerned. The evolution of public spending (net of extraordinary expenses) will replace the criterion of budget balances in assessing the performance of individual countries. However, there should be a minimum debt reduction commitment, which the Commission has proposed at 0.5% of GDP per year.
The proposed reform modifies the existing framework in an important way, while maintaining the limits of 3% for budget deficits he was born in 60% for public debts (whose modification would require an intervention on the Treaties with all the critical points of the case). It is a reform that aims to ensure a greater responsibility (ownership) of governments in defining budgetary policies and in choosing the reforms to be implemented. But which in fact provides ample margins of discretion for the Commission, and the use of the instrument of debt sustainability analysis much discussed and controversial due to its lack of transparency and objectivity. And it is precisely on this alleged excessive discretion of the Commission that the criticisms of the stricter countries have focused, which would prefer to maintain clearly identified quantitative limits for the reduction of deficits and debts.
Allies and opposing visions
The match in Brussels is open and the negotiations will get underway in the next few weeks in an attempt to find a shareable compromise. As expected, and simplifying as much as possible, they confront each other in the negotiation two opposing positions. That of the stricter countries (mainly in Northern Europe) more concerned with guaranteeing certain and quantified rules for debt reduction and perhaps adequate sanctions for those who violate these rules. And that of the countries more inclined to spend (mainly in southern Europe) more interested in obtaining that the new rules allow for the flexibility necessary to finance investments useful for growth and expansionary policies.
In the face of these negotiating alignments, Italy can count on important allies such as France and Spain, who share our principled positions. It would therefore be important and urgent for the government, overcoming mistrust due to the political color of the two executives in power in Paris and Madrid, to define in time a common platform at least with these two countries. And try to bring home an agreement inspired as far as possible by the Commission’s proposals, avoiding that, in the absence of an agreement, the old Stability Pact comes back into force.
Instead, it is better to leave requests such as those relating to theexemption from calculating the deficit certain categories of public investment, a request that Italy has made on various occasions in the past, but which appears destined to encounter the usual resistance (as previous governments have had to note). Better to forget the idea of hypothetical negotiating packages in which to insert a further easing of the rules on the matter state aid in exchange for Germany’s greater willingness to give up quantified debt reduction targets. Finally, it is better to forget the idea of a “trade off” between Italian ratification of the ESM and a solution appreciated by Rome on the Stability Pact, given that, at least in the perception of the other European governments, sooner or later Italy will have to ratify the ESM anyway.
Cover photo EPA/OLIVIER MATTHYS