MEP Nils Torvalds (r) is of the opinion that as long as the large EU member states are heavily indebted, the EU Commission will not dare to put them in the “observation category” mentioned by Petteri Orpo.
On Tuesday, the European Parliament finally approved the reform of the EU’s financial rules.
It is about the reform work of the Stability and Growth Pact, which has been underway for many years.
The negotiators of the Parliament and the Council of Member States reached a preliminary agreement on the new rules in February. Now the parliament gave them its seal.
In the new rules, the acceptable debt and deficit levels of EU countries remain unchanged. However, they wanted to simplify the rules and improve their compliance.
The EU Commission prepares a so-called net spending path for each member country, which is based on structural factors, such as long-term growth estimates and population trends.
However, member states will have different rules on how quickly the debt must be reduced.
If the ratio of debt to gross domestic product is more than 90 percent, the debt ratio must be reduced by an average annual rate of one percentage point.
Countries with a debt ratio of 60–90 percent are subject to a lower adjustment rate of 0.5 percentage points.
If a member country’s debt or deficit is excessive, it may in the future request a dialogue with the Commission before the Commission issues instructions on adjusting expenditures. In this way, the member state can better justify its situation.
Will there be an economic monitoring class?
Prime Minister in Finland Petteri Orpo (kok) and the Minister of Finance Riikka Purra (ps) have justified the adjustment of the state finances with the fact that Finland does not want to fall into the “EU monitoring category”, i.e. the excessive deficit procedure.
Rkp MEP Nils Torvalds however, is skeptical of the idea.
“Regarding the economic monitoring class, I say that I don’t believe in it at all. I want to see the day when the Commission dictates to France that now you have to make an austerity program.”
Torvalds does not believe that Finland would be the first country to be guided by the Commission, while the larger member states get away like a dog from a leash.
“I wonder why none of the journalists ask From Petteri Orpowhy does he use such a strawman to intimidate,” Torvalds stated on Tuesday in Strasbourg.
At the end of the third quarter of 2023, the ratio of public debt to GDP was at the highest level in Europe in Greece, where the ratio was 166 percent.
According to Eurostat the next highest debt ratios were in Italy, France, Spain, Belgium and Portugal, all of which have a ratio of public debt to GDP of over one hundred percent.
The leader of the Social Democrats Eero Heinäluoma is satisfied with the new financial rules and the fact that the reform passed in parliament. In his opinion, the rules turned out to be much better than it seemed beforehand.
Heinäluoma reminds that, based on the old rules, the Commission did not make any EU country pay fines for breaking the rules.
“Now we will have a more reasonable system. The path to repair is much more realistic, it is easier to assume. It is even easier for the member states to accept these rules.”
The Council of Member States still has to give its own final approval to the reform before it can enter into force.
THE FACTS
EU economic rules
The public finance deficit of the member countries must remain below three percent of the gross domestic product and the public debt must be less than 60 percent in relation to the gross domestic product.
These numbers are anchored in the EU Treaty, and it would be impossible to change them without opening the Treaties.
In the Stability and Growth Pact, it is agreed how these rules will be followed and what kind of sanctions there will be for countries that do not comply with the agreed borders.
In the future, the debt must be reduced by one percentage point per year if the debt is more than 90 percent in relation to the gross domestic product.
If the debt is 60–90 percent in relation to GDP, it must be reduced by an average of 0.5 percentage points.