Stability Pact, approved by the European Parliament. Center-right abstained. What it is and what changes now for Italy

Brussels, 23 April 2024 – The European Parliament gave the green light to new Stability and Growth Pact, which replaces the one that was in force until its temporary suspension following the Covid emergency. The Italian centre-right parties abstained on the text, the result of negotiations concluded in February between the European Parliament and national negotiators. The Democratic Party also abstained, “so as not to approve a Pact negotiated by the Meloni government”. Even though the European Commissioner for Economy, Paolo Gentiloni, proposed it. The explanation – provided by the national secretary Elly Schlein in recent weeks – is that this is not the Pact presented by the Commission, it has been heavily modified by the States on the Council table.

However, with today’s votes in favor (367 yes, 161 against and 69 abstentions for the new preventive arm, 368 votes in favour, 166 votes against, 64 abstentions and for the new corrective part of the PSC: 368 votes in favour, 166 votes against, 64 abstentions and 359 votes in favor, 166 votes against, 61 abstentions for the directive modifying the requirements for the budgetary frameworks of the Member States), Europe has accomplished the penultimate step towards definitive approvalawaiting the final approval of the Council.

What changes with the new Pact

With the new Pact it will be more difficult for the Commission to subject a Member State to one excessive deficit procedure whether essential investments are underway, and all the national expenditure for co-financing of EU-funded programmes will be excluded from the calculation of government spending, creating greater incentives to invest. However, gods are established very precise mechanisms for deficit and debt reduction: countries with excessive debt will be required to reduce it by an average of 1% per year if their debt is above 90% of GDP, and by 0.5% on average per year if it is between 60% and 90 %. If a country’s deficit is above 3% of GDP, it should be reduced during periods of growth to reach 1.5% and create a spending buffer for difficult economic conditions.

The new rules contain several provisions to grant more breathing space: in particular, they grant three years more than the standard four to achieve the objectives of the national plan, which may be granted for any reason the Council deems appropriate, and not only if specific criteria are met, as initially proposed. Countries with an excessive deficit or debt can apply for a discussion process with the Commission before it provides guidance on the spending path, and a Member State may request to submit a revised national plan if there are objective circumstances that prevent its implementation, for example a change of government. All countries will provide medium-term plans that will outline their spending targets and how investments and reforms will be undertaken.

Member States with high levels of deficit or debt will receive pre-plan indications on spending objectives. To ensure sustainable spending, numerical reference guarantees have been introduced for countries with excessive debt or deficits. The rules will also add a new objective, namely the promotion of public investment in priority sectors. Ultimately, the system will be more tailored to each country on a case-by-case basis rather than applying a one-size-fits-all approach and will better take social concerns into account.

The political controversy

The European Commissioner for Economy Paolo Gentlemen admits that with the new

Covenant “certainly those with the highest deficit have a more complicated challenge. But having said that, with the existing rules the challenge would perhaps be very, very difficult to implement, with the new rules it will be more compatible.” And since Italy is right among these countries, Gentiloni jokes by commenting on the unfavorable votes of all the Italian parties: “We have brought Italian politics to an agreement…”. In reality, however, the political controversy it is not missing. “The Brothers of Italy delegation abstained because we believe that although the text has been improved compared to the initial proposal thanks to the work of the Italian Government, it still presents some critical points strongly desired by the so-called frugal countries, such as safeguarding the sustainability of debt which will entail less flexibility than expected in the coming years”, explain the co-president of the Ecr group in the European Parliament Nicola Procaccini and the head of the Fratelli d’Italia delegation in Brussels Carlo Fidanza. But from Rome the Democratic Party, through its economic manager Antonio Misiani, replies “The new Stability and Growth Pact outlines an obstacle course for Italy. I see that the right is abstaining on an agreement made by their government and which Meloni said a few weeks ago was the best possible agreement under those conditions. They are denying what their prime minister said, evidently it wasn’t the best agreement.”

“In the end the reform of the European stability ‘package’ which restores the old rigorist financial regime that it will impose on our country cuts and maneuvers and tears and blood, imposed by the Northern European priests of austerity and passively accepted by the Meloni government and its Minister of Economy, it was approved by the European Parliament with the hypocritical abstention of the MEPs of all the majority right in the painful and desperate attempt not to join the undeniable paternity of this historic rip-off. The only vote consistently against this masterpiece, even among the Italian opposition forces in Europe, was that of the MEPs of the 5 Star Movement. The Italians will remember them and thank them when, thanks to the passivity of Meloni, Giorgetti and Tajani, cuts to pensions, healthcare and education will be imposed to respect the absurd budget constraints reintroduced with this reform”, is the harsh attack of the 5 Star Movement.

On the stability pact “il bronze faces award goes to Meloni and associates. During the election campaign they were the ‘patriots’ and Meloni shouted that the fun would be over for Europe. Then they went to the Government and in recent months they gave the OK, without lifting a finger, to this European agreement which damages Italy. Minister Giorgetti spoke of a ‘sustainable agreement’, Meloni said publicly that she was ‘satisfied’ with this nice package of cuts, calling it a ‘common sense compromise. But today there was a twist. We are at the gates of the European election campaign and here’s to that same package of cuts and austerityin its time supported by Meloni and Giorgetti, at the European Parliament FdI and the League abstained”, he adds Giuseppe Conte.

“Meloni negotiates the new rules of the Stability Pact in Europe and then, at the time of the vote in the EU Parliament, her party and the entire government majority abstain. It is clear that this is a denial and a resounding failure for the prime minister and minister Giorgetti! There is an ongoing clumsy and desperate attempt to distance themselves from themselves because they know that the agreement they signed is penalizing for Italy due to their inability to negotiate and their lack of credibility”, declares Piero De Luca, group leader Pd in ​​the European Policies Committee of the Chamber.