Yesterday the European Parliament approved the reform of the Stability Pact with 359 votes in favour, 166 against and 61 abstentions. All Italian deputies (except 4) either abstained or voted against. Fratelli d’Italia, Lega and Forza Italia abstained. The government majority, despite having actively worked on the compromise within the community, preferred not to give its green light also due to the potentially penalizing implications that the new Pact could reserve for our economic policy.
It is no coincidence that many members of the majority – from Calandrini (Fdi) to Martusciello (Fi) – commented on the outcome, hinting at future changes by the new EU Parliament. And the European elections just around the corner convinced the three “legs” of the Meloni government not to split given that the Northern League had long flagged its opposition.
On the other hand, the opposition (who also tried to exploit the affair as an act of no confidence in Minister Giorgetti) certainly cannot give ethics lessons. The Democratic Party, which is part of the PSE and supports von der Leyen, abstained. M5s voted against following Conte’s tirades about the return of austerity. Same dichotomy between IV and Action. Even in this case no one wanted to take the responsibility of endorsing a potentially problematic text.
It is therefore necessary to explain what lies behind these political games which have the manifest objective of not losing consensus in view of elections with the proportional method and in which each party runs for itself. Compared to the old Stability Pact, the medium-term objective disappears, i.e. the trajectory towards a balanced budget through cuts to the structural deficit and, above all, the cut (never implemented) of 5% in the debt/GDP ratio for the Countries heavily in the red like Italy. The “totem” parameters of 3% of the deficit/GDP and 60% of the debt/GDP remain.
What went out the door, however, reappears through the window in the form of a medium-term structural fiscal plan with which countries undertake to converge towards those objectives with 4-year repayment plans, extendable to 7 years in the face of reforms that they improve growth potential and the sustainability of public finances. In practice, the first three years of application will benefit in 2025 and 2026 from a certain tolerance towards the Pnrr (which is debt but also deficit given the co-financing of individual nations) to allow its completion.
The European Commission will subsequently communicate to the States a “reference trajectory” to place the debt on a downward and sustainable path and calculated with a given methodology. The announcement is expected on June 19, after the elections have already ended, but what is certain is that the debt/GDP will have to fall by 1% per year for countries like Italy with the parameter above 90% (the our country is at 137.3% but destined to rise due to the 110% Superbonus). For the few countries with debt between 60 and 90% of GDP, the expected correction is 0.5 percent per year.
The most “thorny” issue is represented by the corrective arm, i.e. the path designed for countries with deficits above 3% of GDP. Also due to the Superbonus, Italy is presented with a more than certain excessive deficit procedure, with an imbalance of 7.4% of GDP. This means that at the end of the recovery plan our country will have to create a safeguard “buffer”, bringing the deficit/GDP to 1.5% in order to manage any unexpected deficit expenditure autonomously (and not relying on Brussels). . In the meantime, a reduction in the structural deficit of 0.5% per year must be guaranteed for countries with four-year plans (0.2-0.3% for seven years). In short, the initial phase of application of the new Pact should not be a tragedy also because, in addition to the Pnrr, interest spending as well as defense investments will be taken into account (excluding it).
The compromise obtained by the Meloni government, as mentioned, is good but – due to German intransigence – it was unable to avoid triggering the safeguard clauses on the deficit which risk worsening the economic situation in phases of recession.
Not to mention that all evaluations will be submitted to the Commission, a political but also very technical body.
Tags: Europe approves reform Pact Italy doesnt vote thinking changing
